Cloudy With A Chance of Crypto Winter

a little different. In the decade or so since that formative Bitcoin white paper, crypto has experienced spectacular growth, rising and then record prices have led to investor fomo fear of missing out. But now in the middle or maybe in the beginning of this crypto winter, investors who entered the digital asset class during that rising bullmarket period are

reevaluating their entire relationships with digital assets. For more on this shift from fomo to oh No, joined by Bloomberg Reports to Claire A Balentine, Claire, so good to have you on the show. Thanks for having me. Not, however, so good for some of the folks listening to the show at the moment. Definitely not. It's been a tough time for crypto traders, especially the ones that are sort of new to the space. What's been going on exactly?

I mean, obviously we've been covering pretty much every element of how crypto prices are declining, But why are retail investors right now really having a tough time? Yeah. So for a lot of the retail investors, UM, they piled in pretty recently to crypto. So you know, we saw prices peak in November of last year, and for many of them, that was right around when they jumped on.

Maybe a little earlier, maybe a little later, but um, a large portion came in around the highs, and so now this is the first time that they're seeing crypto prices actually declined instead of just shoot straight up to the move. And when you say a large portion, I mean some of the stats I've seen cited or anything between like fourty and sixty percent of the people who hold bitcoin at least and certainly other tokens like ethereum to your point, joined when things were really approaching or

hitting those old time highs. Yeah, that's h Some good spens that I've seen are right around that, um, and we've seen those people really struggle with what to do, because when you're holding an asset and suddenly it's price drops. You know, you have a couple of choices, and one is to pull your money out, one is to hold on and keep going. Um. And people are really grappling with that decision right about now about which is the best path to go on diamond hands or paper hans exactly.

And what we mean when we talk about diamond hands and paper hands, right it's it's the idea that you gotta you have to hold on for dear life, like you shouldn't let go. And that's that's the diamond hands philosophy, Like, no matter how brutal the crypto winter, you're going to write it out because you believe that things are going to go back up. And paper hands is a phrase

that's used in a pretty derogatory fashion. I find where it's this idea that if you have to sell for any reason, like maybe crypto just wasn't for you exactly. And you know, unlike a lot of other traditional financial investing, there's this intense community around crypto. No matter what coin you're doing in any facet, usually you're part of an Internet forum, um, whether that's Reddit or Twitter or discord. So not only is that a question of seeing your

money invested suddenly drop. But there's this sort of peer pressure to stay in in some cases to sell, but in a lot of cases to stay in. And so it's an extra sort of layer of your decision making process because it's almost like your friends or people you've gotten really close to online, are you know, pressuring you in one direction or another? Yeah. And for many of these of the people that I talked to that I'll find on Twitter or on Reddit, I mean, their profile

is entirely based around crypto. So some of these people have made it part of their personality. And then you know, what are you gonna do? Give up? Especially when you've integrated it so much into your life and your passions, It gets really complicated, right. It's like those kind of slightly sarcastic means that say things like liking coffee is not a personality, um, But in this case, it's like, in some cases, being pro a bitcoin is kind of

a personality for some of these folks. You've reported extensively, possibly more than most reposes operating right now on the collision of Internet culture and investing. Is there anything about what's happening in crypto right now that is different from what happened with meme stocks. Are the dynamics very similar, Like, what are you noticing, I've noticing a lot more fear. I think I'm noticing people really start to question in some cases, what they're going to be doing moving forward.

I think with some of the meme stocks, it's I won't say simple, but it's straightforward. It's you put money into one stock and you watch it go up or down. When you think of the crypto landscape, it's just that it's a whole ecosystem um and there are people who believe in the technology. A lot of people do, and yet they're seeing the prices of their holdings really decline.

So there are a lot more layers to it. And you know, despite both having an element of fun to it, I think with a lot of meme stocks, people at some level knew that they're worthless or that their value is only caught up in other people's game of it. Whereas with the crypto landscape, there is a lot of a value of technological gains and people are having to sort of sort out in what corners they want to

invest in, what is safe, what is not. It's it's more nuanced and you know, nuance brings complexity and decision fatigue and more room for peer pressure and stress, which in in some of your reporting you talked about the fact that this is starting to cause people to wonder whether they want to switch back into the quote unquote like real world exactly um and especially as we see inflation really continue to be high and we see um

housing prices still very very high, warnings of a recession coming. People are having to make some some tough choices about where they're going to put their money and what they do with it. And I think what option for people who maybe have crypto holdings that have seen them go down. Obviously it is just to stay in and you know, see what happens. Which is easy to say if you're

okay without that money and just leaving it there. But say for people who are suddenly facing increased bills in other areas of their lives, they might need that money

and need to sell it a loss. So it with the current economic environment, it makes everything a lot more complicated for these investors, you know, and it also plays into some of like the psychology of theories, like people are really loss averse, like the idea of losing something that we have is is really really challenging for us. And so that tension between I don't want to turn this paper loss into a real loss, but I also need to pay my grocery bills. It feels very real.

It does. And that's one thing that I hear people tell me is that it's not a loss until I sell, and that is true. But at the same time, the money you have access to has gone down if you need it for an emergency or something. So and and that being said, one of the challenges of reporting on this space is that it's really difficult to find someone

who will admit a big loss to you. We'll be right back with more from Bloomberg Reports to Clay about in time on how investors are responding to this crypto winter. I remember we were having a conversation over you know, kind of before the November December holidays last year, and you were talking about these folks who were gifting n f T s or who were sitting around the their dinner tables with their families, being like, you should get into big coin right now. I wonder what those conversations

are like right now. I'm wondering that as well. And I think you know, it's I think of how hard that must be to have that conversation with your parents or with your relatives that you've been talking this up, and you know, like, like we've said, there's a lot of nuance in it, but really it's difficult to um admit that you've made a mistake or not even that to sort of have the the value of your argument go down at least right now, even if you believe

the coin is going higher. At least right now, it's kind of hard to make a case that, you know, all your relatives should invest in bitcoin. Is there you know, in one of the stories that you wrote, you mentioned a person in Canada who's a software engineer who got out the last time. What's he up to these days? And by the last time, I mean the last time we experienced this kind of crypto ininto I mean for people who have experienced this before, you know, it's a

whole another kind of of mindset. I think. So they're they're thinking, is this, you know, how much can you apply what you've learned in the past to what you know now? And you know they're trying to take these lessons, but like, like we've been talking about it is such a different kind of environment than the last time. I mean, you know, the crypto industry spans so many different corners of the world, and also this we're in a really interesting you know, are we or aren't we heading into

a into a recession type of environment? Um. So for those who have exp are instant last time, I mean, the temptation is a lot of the times too to hang on. You know, they've they've said, we've been this, through this before, and we're going to go higher from here. Um. But it's it definitely gets harder as the losses, you know, keep coming, even if those losses are just on paper. Yes, exactly.

All right, Well, Claire, thank you so much, and if folks want to check out more of your reporting, they can find you on the Bloomberg terminal, on Bloomberg dot com and on Twitter as well. Your handle is CFB Underscore A team, Yes, excellence. Thank you so much for joining us. Thanks for having me on the next episode

of Bloomberg Crypto. As investors around the world are grappling with the reality of sustained declines and prices across various crypto markets, more people are asking the question what's next and in some cases Who's Next Tomorrow. Bloomberg Report Emily Nicole is interviewing Alston Zecca, partner at Global Venture on eight Roads, for his perspective on how the crypto winter

is affecting sentiment and markets. I'm Stacy Marie Ishmael, and this is Bloomberg Crypto, a daily podcast from Bloomberg and I Heart Radio. For more shows from I Heart Radio, visit the I Heart Radio app, Apple Podcasts, or wherever you get your podcasts. Email your questions, comments or suggestions for the show to Crypto at Bloomberg dot net and you'll find us on Twitter at Crypto. The supervising producer of Bloomberg Crypto is Vicky Vergalina. Our producer is Mohammed Peru.

Associate producer is zan Ab Sidiki. Desta wonder At is our engineer. Original music by Leo Sidron