What bitcoin’s collapse could mean for your retirement


Bad news for a lot of those millennial “bitcoin Bandits.” Kids, if this crypto collapse gets any worse you may end up having to work for a living after all.

Like the rest of us. Yep, it sucks.

Youngsters’ dreams of an easy, early and rich retirement were getting a pounding this week as their favorite cryptocurrencies collapsed. Prices for bitcoin

and other futuristic “currencies” were in free fall Wednesday.

Anyone who has bought into bitcoin since February is already in the red. The flagship digital currency is down around 40% from its peak.

Unless the collapse suddenly turns around—and it might, who knows?—a whole new generation may be introduced to the sad, grim and ugly truth: Unless you are very lucky, there is no easy shortcut to riches and an early retirement.

Meanwhile the crypto crash may have implications for the retirement plans of the rest of us—including the overwhelming percentage of the population who have never bought a cryptocurrency, may not even know what one is, and don’t even care.

This crypto implosion is a bigger deal than Main Street may realize. In total, according to, which tracks these things, a staggering $800 billion has been wiped off the value of these cryptocurrencies in a week. Hard to believe, but true. That’s equal to the entire market value of, say, Procter & Gamble

and Johnson & Johnson

put together. It’s worth more than the aggregate values of the vaccine developers J & J, Pfizer

and Moderna
and about as much as the entire market value of Spain. No, really.)

Some of this wealth never existed, even in anyone’s minds, because a chunk of these cryptocurrencies weren’t owned by anyone. The digital keys to the bitcoin or whatever had long been lost. Nonetheless large numbers of traders and speculators feel themselves vastly “poorer” than they thought they were as recently as a week ago.

That can hit the stock market. Traders who feel poorer have less money with which to speculate. Traders suffering heavy losses can lose their euphoria.

There is no serious doubt that the same speculative mania that drove crypto higher during 2020 and earlier this year also drove the stock market. Hot money flowed into “hot” stocks like Tesla
And now it’s been flowing back out. Tesla, notably, has slumped with bitcoin over the past month.

If you think this doesn’t affect everyone else, think again. One of the mainstays of regular retirement accounts is Capital Group’s $270 billion Growth Fund of America
Its biggest holding? Tesla—5.4% of the portfolio. (Tesla is also the sixth biggest holding in, say, Vanguard’s Growth Index Fund

It’s no protection that day traders and speculators are only a small part of the market. Price movements are caused by the behavior of the traders at the margin. Grandma in her index funds isn’t going to be selling her stocks to cover her crypto losses, but she wasn’t driving the market higher last year on the back of her crypto profits either.

The dot-com collapse in 2000 helped drive the broader stock market into a bear market that lasted three years. Nobody believed that the crisis among subprime Florida condo-flippers in 2007 would bring down the financial system in 2008. The current situation is hardly the same, but there are always parallels.

It’s too early to call time on the bitcoin bubble (although it’s starting to look like Bill Maher may have timed this almost to the day). Tech stocks rallied about 30% in the spring and summer of 2000, even after the dot-com bubble had burst. If we really have seen the peak—and absolutely no one knows—there will be plenty of people disastrously willing to “buy the dip” all the way down.

But the era of fun and games on the market may be over.

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