Crypto crash: how a teacher’s dream investment turned into a nightmare loss | Cryptocurrencies

“If I’d sold everything, I’d have a quarter of a million pounds,” says Duncan* ruefully of the staggering value of his cryptocurrency holdings at the start of this year.

Like many amateur investors, the 47-year-old former elementary school teacher got into cryptocurrencies in a big way during the coronavirus pandemic, plowing his savings into a portfolio that appreciated in value and that he believed would enable him to get ahead. property ladder.

“I wanted to get to $500,000 (£414,000), then withdraw half. I had over $300,000 around Christmas,” says Duncan.

But speaking from his home in Edinburgh, he admits to having lost almost everything in the recent digital asset market rout. He is left with a portfolio worth (at the time of writing) around £4,000 – a fraction of the estimated £40,000 he poured in.

Duncan is one of a growing number of Britons investing in digital assets. By the start of 2021, an estimated 2.3 million people in the UK had crypto investments, according to Financial Conduct Authority (FCA) research published last year, which remains arguably the most comprehensive official study of its kind. It is clear that the number will have increased since then.

The FCA then said that the profile of crypto investors was skewed towards men aged over 35 and from AB social character, with the median holdings around £300 – suggesting that many people had just “dipped their toe in the water” as opposed to investing their savings.

The study revealed that cryptocurrencies had become more normalized, with fewer viewing them as a “gamble”, and more as an alternative or complement to mainstream investments. While ownership is increasing, the FCA study, which preceded this year’s global cryptocurrency crash, pointed to a shrinking level of understanding, suggesting that some did not fully understand what they were buying.

Alice Haine, a private finance analyst at investment platform Bestinvest, says cryptocurrencies are still developing as an asset class, and are a more speculative investment than investing in the stock market.

“The steep declines in crypto values ​​were partly a reflection of the fact that it is a market, unlike equities, that is dominated by private investors,” she says. “With inflation and recession fears rising, many investors liquidated their holdings out of fear of further price falls, but also to bolster their bank balances and savings to help them survive the cost of living crisis.

“Any investor considering adding cryptocurrencies to their portfolio needs to be fully aware that it is a hugely volatile market to be in, with the price often extremely unpredictable.”

As more small investors get involved, the government is changing the law to place ads for crypto assets under the same rules as other financial promotions such as stocks, shares and insurance products. The move follows concerns about misleading cryptocurrency ads.

Meanwhile, MPs on the Treasury Select Committee recently launched an inquiry into the role of crypto-assets in the UK.

“In recent months, the value of most cryptoassets has fallen dramatically,” Mel Stride, the committee’s chairman, said last month. “We will examine the opportunities and risks that crypto presents, where additional regulation may be needed, and the lessons the government can learn from other countries.”

Duncan was introduced to bitcoin by a friend in the early 2010s when the value of the cryptocurrency was under a hundred dollars. He watched the value take off in 2017, and when it broke through $10,000, he thought, “This thing must be legit. I have to start buying it.”

He had returned to the UK in 2014 after teaching abroad for more than a decade and found that many of his friends had settled down and bought houses.

“I’d had a fun life and didn’t save for the future…Crypto was my chance to catch up.”

In 2017 he invested £100 “here and there”, but in 2018, when the market crashed, he stopped. “I was still interested in crypto and the idea that you could control your financial destiny instead of just trying to save money.”

From 2019 he started investing more regularly again, and the following year he was pocketing £400 a month. It was becoming a healthy nest egg. His early investments were in bitcoin and ethereum, but in 2021 he got into Luna and owned “2000ish” coins which in May dropped in value from $85 to under $1.

The idea of ​​decentralized finance or “DeFi”, promoted in crypto circles, appealed to a worldview shaped by the 2008 financial crisis.

“You can do things in DeFi that you can’t do in the traditional financial system,” says Duncan, giving an example of how easy it was to borrow against crypto compared to the process involved in securing high street credit.

Duncan admits he stopped maintaining his spreadsheets once he started doing well. “Even if I had paid out as late as April, I would have had a quarter of a million,” he says. “No one saw it coming. Actually, that’s not true. People saw it coming … the bubble I was in didn’t see it coming.”

The scale of Duncan’s loss was “stressful” and he remains with his family. “You know there are different stages of grief or whatever… Denial was definitely one of the stages, but then you accept it. All the paper profits I had, they’re gone – it’s in the past.”

Now he’s “little to sell anything … Just because if I do, it locks in a loss.”

He no longer teaches, and despite his devastating losses, he remains convinced that cryptocurrencies will rebound—so much so that he is pursuing a career in the industry.

After all, he says, people lose money in the stock market all the time. On social media, popular refrains among crypto investors include “we’re still early days” and “WAGMI … We’re all gonna make it.”

Duncan adds: “We’re still early days.”

* Not his real name