Cryptocurrency plunge gets "out of hand", wipes out profits for everyday investors Image Credit: Shutterstock

By the end of last year, the value of Hasten Carter's cryptocurrency holdings had climbed to about $250,000. He moved to a nicer apartment, bought a new truck, and started thinking about pursuing his dream of a full-time career in game development.

But over the past two months, the value of cryptocurrencies has plummeted, taking with it much of Carter's digital nest egg, a mix of Ethereum, the second-most popular cryptocurrency, and a number of more obscure coins.

"It's gotten out of hand to the point where I'm not sure I'm comfortable I can keep my money," said US-based Carter, age 30. Of his hopes for a new career, he said: "I'm not sure if it's as wise of a decision."

Thousands who jumped into crypto investing over the past two years in hopes of a rocket ride to instant wealth now face a similar reckoning: 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 slide has accelerated over the past week as investors have fled riskier bets for safer harbors. The "crypto crash" has put pressure on regulators worldwide to impose stricter rules on the industry - and raised fresh questions about the dangers of cryptocurrency for the average investor.

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Over the past two months, the value of cryptocurrencies has plummeted, taking with it much of people's digital nest egg.

Fresh dangers

"You're going to get more people generally unhappy about crypto or feeling they were wronged in some way," said Ian Katz, managing director of US-based Capital Alpha Partners. "All regulators want to appear to be alert behind the wheel, and if this turns out to be a continued bloodbath, it increases the impetus for action."

The plunge in crypto prices has tracked a stock market sell-off that has seen the broad-based US S&P 500 shed about 8 per cent of its value this year, as investors brace for interest rate hikes from the US central bank and potentially underwhelming corporate earnings.

Yet both the crypto and stock markets are attempting to claw back some of their recent losses. Bitcoin, which was trading below $33,000 on Monday morning, recovered to around $37,000 on Tuesday afternoon. And after two days of wild swings, the S&P 500 and the Dow Jones industrial average stood at their levels at the start of the week.

In the meantime, the crypto swoon is hitting celebrities and everyday investors alike. A number of star athletes have entered into promotional deals with crypto companies that involve converting at least part of their salaries into digital assets. 

Both the crypto and stock markets are attempting to claw back some of their recent losses.

More interest

The industry's surge has drawn in a widening circle of people: One in 6 now say they have invested in, traded or otherwise used cryptocurrency, according to a recent Pew Research Center study. And that pool is increasingly diverse. About 35 per cent of those who have bought or traded crypto in the past year have annual household incomes below $60,000, according to a poll at the University of Chicago.

Many crypto holders remain undeterred. Relative veterans point to their experience holding on through a crash in prices in late 2017 and early 2018 that investors now call the "crypto winter" - and the dramatic rally that followed it. They say recent price fluctuations have not shaken their faith in the technology's long-term value, bidding farewell to new investors with a kind of "so long, leaves more for the rest of us" lan.

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"The crypto people here are likely long-term holders. Many, like me, have been in the space for years and seen multiple price cycles. No need for any of us to panic sell. We've seen it before," said Burke, co-founder and chief marketing officer of Portal, a US-based peer-to-peer cryptocurrency trading platform.

Portal did consider the market moves in deciding whether to go forward with its planned public sale, since "public sentiment and investor contributions" are closely tied to the price of bitcoin, said Burke, whose company has four team members based on the island. Ultimately, they decided to move forward.

"I personally think this slump is very temporary," he said.