Amidst the hype, they bought crypto near the top. Now they are dealing with painful losses
For Michelle Milkowski, who lives in Renton, Washington, one thing led to another.
Because her son’s daycare closed in the first days of the pandemic, she had some extra money. So, like millions of other people, Milkowski downloaded Robinhood trade app.
At the time, the stock market was at the beginning of what would become a record-breaking run, and Milkowski’s new pastime became profitable.
She continued to trade stocks, but in early 2021, something else caught her eye: Milkowski noticed that the value of Bitcoin had reached $60,000.
“I just couldn’t believe it,” she says, noting that she first heard about the popular cryptocurrency in 2016, when the price was less than a hundredth of that. “I felt like I just missed the boat because I could have bought it before it blew up.”
Last spring, Milkowski took another look at Bitcoin, and she took a leap. “Better late than never,” she remembers thinking.
First, Milkowski bought $500. Then $10,000. By the end of last year, Milkowski estimates, she had spent close to $30,000 on crypto.
In retrospect, the timing was terrible.
Like many first-time investors, Milkowski bought into digital currencies as they neared all-time highs and as companies spent tens of millions of dollars on marketing to broaden crypto’s appeal.
Quarterback Tom Brady and his wife, supermodel Gisele Bündchen, starred in an ad for FTX, and a commercial for Crypto.com featured Oscar-winning actor Matt Damon.
These were designed to appeal to a potential investor’s fear of missing out.
“Fortune favors the brave,” says Damon. The ads included little or no explanation of crypto and how risky the unregulated asset is.
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About two weeks after the Crypto.com ad debuted, Bitcoin hit a new record: $68,990. Today, it’s less than a third of that.
Although supporters long claimed it would be a hedge against high inflation, that has not proven to be the case. As inflation has increased, Bitcoin has fallen in line with high-growth technology stocks. Rising interest rates have made speculative assets less attractive, and cryptocurrencies are no exception.
Milkowski, who is the head of a major insurance company, says those ads and the “crazy exuberance that surrounded crypto” appealed to her.
“You know, it kind of gives it an endorsement that it’s not just scammers using it,” she says. “Then I felt confident to try it out, to put my money there.”
Milkowski ended up branching out from Bitcoin, to Ethereum, Shiba Inu and Luna, a so-called “stablecoin” that collapsed quickly and catastrophically in May.
Early on, Milkowski decided not to risk more than she could afford to lose, and Ramiro Flores set the same ground rules when he first bought Bitcoin in 2018.
“I like to gamble. I go to Vegas quite a bit,” he says. “So, I was like, ‘Hey, you know what? Like, this is just like a little trip to the casino.’
Flores, who used to be a firefighter in Edinburg, Texas, remembers talking about cryptocurrency at the firehouse. After doing some research, he bought $2,000 worth of Bitcoin.
At its peak, the total value of cryptocurrencies worldwide was around $3 trillion. Today it is around $1 trillion.
Flores calls the setback heartbreaking, but it hasn’t shaken his determination.
“It’s absolutely horrible,” he says. “But I have faith.”
Flores has continued to buy Bitcoin and Ethereum, and he says he believes they will return. Gradually.
He is also optimistic that wider use of digital currencies will lead to changes in banking and finance.
“Right now I have some money, but I’m thinking, ‘Hey, if I don’t sell, I don’t lose.’ I’m not losing that money, technically speaking, he says. “So, I’m just going to keep riding this little roller coaster that we’re on.”
For Milkowski, the ups and downs – well, especially the downs – became too much, and she decided to retire.
“There’s definitely peace that comes with selling such a volatile asset,” she says. “I don’t have to worry, ‘Am I losing $500, $1,000 today?’
In May, Milkowski paid out completely. She decided to cut her losses, which ended up being around $8,000.
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