The precipitous drop in cryptocurrency prices and the downfall of several platforms have led to a sharp decrease in the number of crypto billionaires. This leaves investors questioning whether they should be concerned.
Henley Global’s latest investigation into the world of cryptocurrency wealth indicates that merely six individuals globally hold over a billion dollars in Bitcoin (BTC). Considering the hype surrounding cryptocurrencies, this number seems surprisingly low.
Moreover, the total market value of cryptocurrencies stands at $1.2 trillion, merely a fraction when compared with other assets. The World Gold Council estimates the gold market cap around $12 trillion, while State Street Global Advisors’ last year report projected the total value of all investable assets a staggering $179.0 trillion.
These figures potentially hint at the massive untapped potential of crypto, which currently represents less than 1% of all investable assets. An interesting thought is what could happen if crypto could secure even a slightly larger portion of this market. However, it could imply that crypto, in the grand scheme of things, might not be as influential as perceived.
They define a Bitcoin billionaire as someone owning a billion dollars in Bitcoin. In contrast, in 2021, this term referred to those who amassed their billions through crypto activities. The study doesn’t elaborate on how these 22 global crypto billionaires accumulated their wealth.
Many high-profile crypto billionaires have seen a drastic reduction in their net worth since the peak of the crypto frenzy a few years ago. Forbes reported in 2022 that the number of billionaires who had made their fortunes via cryptocurrencies was down to 19. One notable example includes Sam Bankman-Fried, whose wealth and popularity have plummeted intensely.
Forbes noted that 10 of these 19 are no longer billionaires, with their collective wealth plummeting from $140 billion to $30 billion. This sharp decline reflects the decrease in crypto’s value and the failure of several crypto platforms, including Bankman-Fried’s empire. Bitcoin has been fluctuating between approximately $20,000 and $30,000 this year, a substantial drop from its peak of about $67,000 in November 2021.
The question arises, are cryptocurrencies losing their significance? Crypto billionaires can afford risky ventures like cryptos, but ordinary investors may not be able to tolerate such losses. With Henley & Partners reporting the number of crypto users at 425 million, many people could face significant financial risks if crypto fails.
A severe fall in crypto prices and platform failures have led to decreased consumer interest and confidence in cryptocurrencies. Investors with funds on now-defunct platforms are awaiting the outcomes of potentially lengthy bankruptcy proceedings.
From an investor perspective, the current crisis of confidence is concerning. Yet, a more critical issue is whether Bitcoin and other cryptocurrencies can thrive in the long term. Given their high risk, would it be better to invest in other, safer assets?
Cryptocurrency needs to overcome various challenges for it to stay relevant and attain its potential. Putting regulatory and confidence issues aside, technical aspects like ease of use, broad acceptance as a payment method, scalability, and network fees still need improvement.
I personally own Bitcoin and other cryptocurrencies, which I plan to hold long term. They have considerable potential as digital currencies, especially in global settlements. While I believe smart contract cryptocurrencies could be transformative, there are no guarantees, and it is still premature. Even if the cryptocurrency industry succeeds overall, currently popular coins and tokens might not.
Most importantly, unless you’re extremely wealthy, don’t rely on crypto to become rich. It should play only a minor role in a diversified portfolio. For long-term wealth accumulation, consistent investments over time into a balanced portfolio of mixed assets is a proven strategy. If unsure where to start, The Motley Fool’s guide on investing in stocks could be helpful.
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At The Ascent, we strongly believe in the Golden Rule. Hence, our editorial opinions are solely ours and have not been previously reviewed, approved, or endorsed by included advertisers. Also, our editorial content is separate from The Motley Fool’s and is created by a different team of analysts. Emma Newbery holds positions in Bitcoin, and The Motley Fool owns and recommends Bitcoin. Read more about The Motley Fool’s disclosure policy here.