The day crypto investors have been dreading arrived on Friday, January 21st, “Crypto Black Friday.” Looking back, we can see what went wrong.

When you REALLY think about it, money is a weird concept. 

As human beings, we don’t actually need “money” to function. Think about what we actually need. We need food, water, shelter, and clothing. That’s it. We don’t actually need money.

Our ancestors lived tens of thousands of years without money, totally content with what they could hunt, gather, or create. The idea of “buying” something beyond basic bartering was a completely abstract concept until the first person assigned value to a hunk of metal. 

I know this is more of a philosophical conversation, but it’s important that we realize that the idea of “money” is really just that: an idea. 

We as a society have an unwritten agreement in which we all say that a piece of paper is worth X, silver is worth Y, and gold is worth Z. 

If tomorrow we collectively agreed that every piece of gold was worthless and that no one wanted paper currencies anymore, then those forms of currency would be worth exactly ZILCH. 

It’s all an agreement based on nothing. Sometimes it works…sometimes it doesn’t.

I had to remind myself of that fact when I watched HALF the value of my crypto wallet disappear over the past few days. If society ended tomorrow, the only things that would have value are the things that we could use: water canteens, cars, gasoline, bullets, etc. 

It’s easier to think about the abstraction of money than to realize that I just lost half of my investment in the span of a day. 

The Factors That Drove Cryptos Down

That one hurts.

I’m human, I have an ego, and these kinds of things are going to happen. 

So, what I wanted to do was take a look at WHY this happened with an open mind, not an angry one, to see if I can’t pick up any clues as to why we experienced this incredible drop in the crypto market. 

Now, I wrote an article on Friday lamenting my loss, but at the time we could only speculate why we lost so much value.

Now, with a few days removed from the event that many are calling Crypto’s “Black Friday,” we can get a better picture of what really went down. 

When I wrote the first article (which you can read HERE), the biggest reason we had was the fact that Russia was threatening to ban crypto. 

Now, I understand why talk about a major country banning crypto could send investors into a selling frenzy. We all witnessed what happened when China followed through on its threat and made cryptos illegal. If that happens in Russia, that’s a huge segment of the global population that can’t invest in DeFi, which is a huge loss of buyers. 

It makes sense why there would be a reaction…but Russia’s threats weren’t the only reason cryptos took a poo. 

An even BIGGER culprit was the Bitcoin-led market liquidations that happened on the 21st. 

The market witnessed one of the BIGGEST single-day liquidations, with almost $880 million worth of liquidations recorded at the time of this writing.

Leading the way to these selloffs was Bitcoin, which recorded close to $175 million liquidated contracts in 24 hours.

That’s a lot. 

So, we’ve got Russia…we’ve got a contract liquidation…and finally, we’ve got a dip in the stock market that spooked investors across the board.

Cryptos And Stocks: Closer “Cousins” Than We Realized

The US market has had a HUGE impact on the crypto market. We’re finding that cryptos are more closely tied to tech stocks than we realized, and when that market loses value, cryptos lose value.

These three reasons are why we saw a bloodbath in crypto…and I’ve got to admit, I’m a little nervous. 

Cryptos have never operated in a bear market. If they act like tech stocks and wind up taking a dump until the next bull shows up, then we might see cryptos in sub-basement levels for years. 

Let’s hope that they can find their OWN footing – and start reacting independently of the stock market…

Because if they don’t, the entire shebang is on the verge of collapse–and I don’t think our society can handle that. 

I could be wrong–and I hope I am–but cryptos need to build their own footholds if they’re to survive, and we can only pray they do. 

Until next time…

“Wealth consists not in having great possessions, but in having few wants.” – Epictetus