By the end of last year, Hasten Carter’s cryptocurrency holdings had grown to around $250,000. He upgraded to a nicer apartment, purchased a new truck, and began to consider pursuing his dream of a full-time career in game development.
However, the value of cryptocurrencies has plummeted in the last two months, wiping out much of Carter’s digital nest egg, which was comprised of Ethereum, the second-most popular cryptocurrency, and a number of more obscure coins.
Thousands of Americans who jumped into crypto investing in the last two years in the hopes of a rocket ride to instant wealth are now faced with a similar reality: Prices for cryptocurrencies — from relative stalwarts such as bitcoin and Ethereum to more exotic tokens — have cratered since reaching all-time highs in early November, wiping out an astonishing $1.35 trillion in value globally, nearly half of the total market, according to CoinMarketCap.
The decline has accelerated in the last week as investors have fled riskier bets in search of safer havens. The “crypto crash” has increased pressure on Washington regulators to impose stricter rules on the industry, while also raising new concerns about the risks of cryptocurrency for the average investor.
The drop in crypto prices has paralleled a stock market sell-off that has seen the broad-based S&P 500 lose about 8% of its value this year, as investors brace for Federal Reserve interest rate hikes and potentially underwhelming corporate earnings.
Nonetheless, both the cryptocurrency and stock markets are attempting to recoup some of their recent losses. Bitcoin recovered to around $37,000 on Tuesday afternoon after trading below $33,000 on Monday morning. After two days of wild swings, the S&P 500 and Dow Jones industrial average were back to where they were at the start of the week.
Meanwhile, the crypto craze is affecting both celebrities and everyday investors. A number of well-known athletes have entered into promotional agreements with cryptocurrency companies that involve converting at least a portion of their earnings into digital assets. Odell Beckham Jr., a wide receiver for the Los Angeles Rams, announced in late November that he would convert $750,000 of his 2021 salary into bitcoin as part of an agreement with the payment service Cash App.
According to Action Network analyst Darren Rovell, if Beckham converted that amount in a lump sum at the time, it could be worth as little as $35,000 now, after accounting for bitcoin’s drop and his tax burden on the original payment.
The industry’s growth has attracted a growing number of Americans: According to a recent Pew Research Center study, one in every six people has invested in, traded, or used cryptocurrency. And the pool is becoming more diverse. According to a summer poll conducted by NORC at the University of Chicago, 44% of those who purchased or traded cryptocurrency in the previous year are non-White, and 35% have annual household incomes of less than $60,000 per year.
Many cryptocurrency holders are unfazed. Relative veterans point to their experience surviving a price crash in late 2017 and early 2018 — dubbed the “crypto winter” by investors — and the dramatic rally that followed. They claim that recent price fluctuations have not shaken their belief in the technology’s long-term value, and they bid farewell to new investors with a sort of “so long, leaves more for the rest of us” élan.
White House officials intend to release a memorandum on cryptocurrencies as soon as this month, according to people familiar with the matter. Among these is White House guidance on a central bank digital currency, a type of digital cash backed by the Federal Reserve and capable of competing with some privately issued cryptocurrencies. The White House is also expected to comment on the impact of cryptocurrency on financial market stability and the need to align digital currency regulations with those of other countries that may take a different approach.