Think Crypto Loses Money? See the Dow Wipe Out Wealth
Cryptocurrencies sand a siren song in December, taking newcomers on board, and leading to some steep losses. But how is traditional investment faring?
If you think cryptocurrencies are a bubble, you need to look farther afield. The global economy has seen unprecedented growth just while Bitcoin was growing. In March 2009, just as Bitcoin was producing its early blocks, the Dow Jones 30 index hit a low of around 7,600 points, after being shaken down by the credit default swap crisis, the bankruptcy of Lehman Brothers, and other bad news that took it down from the previous boom.
The behavior of the Dow Jones 30 has not escaped the scrutiny of $crypto commenters on Twitter:
At the highest peak, the Dow Jones 30 calculated above 26,000 points. This growth of between 3 and four times is phenomenal in the conservative world of the stock markets. During that time, individual stocks boomed even more.
So, is the appreciation of Bitcoin starting to look rather reasonable in comparison?
But here is the problem: while Bitcoin had a "market capitalization" of nearly $300 billion at one point, the rough estimation of real, actual personal funds coming into cryptocurrencies is around $200 billion. Certainly, individual investors may have gone overboard on buying the peak.
How much money are locked into the stock market? And more importantly, what kind of money? In crypto, the money most often comes from a gambling stash, or "fun money", or other funds that would not topple the financial boat of high net worth individuals.
Traditional Investments: Stable and Safe?
Investing in the stock market has been a fixture of the Western World, so when it comes to the Dow Jones 30, we are looking not only of people losing "fun money" - but potentially losing their opportunity to retire.
Stocks are seen as safer, more conservative - yet risk is risk. And if there is a giant system telling you that investing and believing all manners of "experts" is a reasonable thing, then even more money is at stake.
Investing in crypto has also come with a big caveat, pointing out the volatility, the technical risks and potential scams. Buying the Dow is seen as a good, solid move.
But what if the Dow, now sliding to 24,000 points, continues downward? Some believe the US stock markets are overheated, suffering from another bout of "irrational exuberance" even bigger than the last one.
And this time, the repercussions of the bubble may be much more immediate, and much more painful, affecting even more Average Joe investors. What is even worse, the downturn of American markets could signal a worldwide economic pessimism, and affect other regions. Indices like the FTSE 100 and Nikkei 225 are also poised near all-time highs, potentially sliding to painfully lower levels.
The reason for this is that right now, stocks are trusted, and crypto is not - hence the quick exodus. The other reason is, the world of stock trading is closed off and limited to professionals, with non-transparent behavior. What if stock investing was as democratic as buying and selling cryptocurrencies?
The recent panic mode in crypto reveals a small and rather new market. But it may be in fact far less dangerous, and far more open to responsible management of personal finance, compared to the stock market, considered rather safe, but posing global risk.