Stocks Aren’t The Only Asset Class Imploding. Bitcoin Is Crashing Also.

Investors don’t need to be told about the recent stock market crashes. The Dow Jones index is down 12.5% since January 22. The S&P 500 is down 16.1% in the same period. The NASDAQ Composite is down an even more spectacular 26.5% since November 19, 2021.

This puts NASDAQ solidly into a bear market (down 20% or more from an interim peak) while the Dow and S&P 500 are both in correction territory (down 10% or more from an interim peak).

On current trends, the S&P 500 may break into bear market territory in a matter of days with the Dow not far behind. This collapse coming so soon after the market crash of March 2020 may surprise some investors, although this outcome was predicted in my last book The New Great Depression, published in January 2021.

What truly is surprising is that the stock market is not alone in its recent dismal performance. U.S. Treasury bonds, foreign currencies, gold, and other commodities have all declined sharply side-by-side with stocks.

There are good reasons for this including the prospect of a recession that could cause stocks, gold, and commodities to fall in sync. Still, the market carnage doesn’t end there.

The biggest collapse among major asset classes is in Bitcoin and other cryptocurrencies. This article describes how 40% of all bitcoin investors are now underwater on their holdings. And the damage is by no means limited to Bitcoin.

Huge losses have arisen in other popular cryptocurrencies such as Ethereum, XRP (known as Ripple), and Solana. The price of Bitcoin has fallen 54% since November 9, 2021. Ethereum has fallen 57% in the same time period.

Still, neither of those crypto collapses was the most spectacular. A cryptocurrency called Luna fell from $116.84 on April 5, 2022, to $0.0062 on May 16, an incredible 99.9% crash in less than six weeks. That’s not just a crash, it’s a complete wipe-out.

The danger in these types of collapses goes beyond the losses to individual investors who happen to hold the coins. Such losses are indicative of a wider global liquidity crisis emerging.

They are also examples of financial contagion, which is mathematically identical to viral contagion. As one market crashes, investors in other markets sell assets to raise cash and the collapse virus quickly spreads to those other markets.

In a full-scale market panic of the kind we saw in 1998 and again in 2008, no asset class is safe. Investors sell stocks, bonds, gold, cryptos, commodities, and more in a mad scramble for cash.

The best description I’ve ever heard of the dynamic of a financial panic is, “Everybody wants his money back.” We seem to be headed to that state of affairs at a rapid rate.

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