The Reasons Why Cryptocurrencies Have Fallen

May 24, 2021 | Free Resources, Investing

Cryptocurrencies have crashed in the last few weeks. On the Trey Ware Show, Karl gave some reasons for the cryptocurrency crash of late.

Trey Ware:

… about that. But first, and I’ve got to make sure I do this right. No, it’s not working. So you guys, what do I do? No, that’s not right. Huh? I do. I have him on hold. Now what I do? Oh, thank you. It’s been 14 months and we haven’t used the phone. So we’re going to have to work that deal out a little bit. We’ll have to figure that one out. Karl Eggers, creatingricherlives.com is joining me. Good morning, Karl. How are you?

Karl Eggerss:

Trey push … Get the WD-40.

Trey Ware:

Yeah, that’s what it’s going to take.

Karl Eggerss:

Use a little straw and squirt it right in that button and then push it. It will bounce back.

Trey Ware:

I’ll go squirting things in the phone here. I’ll be working somewhere else by noon, I guarantee you that.

Karl Eggerss:

Exactly.

Trey Ware:

So what’s going on with Bitcoin? Tell me about that. What’s going on?

Karl Eggerss:

Yeah. There’s been several reasons why we’ve seen this crypto crash. And it has been. We’ve seen about a 50% drop in most of the cryptocurrencies, including Bitcoin being the Big Mac of the bunch. And this is not the first time. If you want to make money in any kind of investment, you have to put up with a lot of volatility. And certainly cryptocurrencies fit the bill there. But we saw wild speculation coming into the last several weeks. And so you started to see some profit taking, meaning people were just saying, “You know what? I’m going to lock in some profits here. And I’m going to sit on cash for a while.”

Karl Eggerss:

Well, when that started, it caused a lot of other people to have to sell. It’s called “margin call.” It happens in the stock market. A lot of Bitcoin has been purchased on margin, meaning on borrowed money. So when prices fall, then you either have to put up more collateral, meaning more money into the account, or you have to sell your position. So we saw that happen. We hear Elon Musk come out and say, “You know what? It does use a lot of electricity,” which is funny because he’s right. Bitcoin mining takes up a tremendous amount of energy use. And it’s ironic that somebody that’s in charge of this green company … It’s almost like he was forced to say that. So that caused them selling.

Karl Eggerss:

Then we see China cracked down on Bitcoin mining and they wanted to try to eliminate that. That pushed it down. The fourth thing that happened was the US … If you look on your tax return this year on your 1040, there’s a place on there that says, “id you purchase or sell any cryptocurrencies in 2020?” And it doesn’t say, “If yes, do this.” Or, “If no, do this. You just acknowledge yes or no. And the idea is you’re publicly saying, “Yes, I did this.”

Karl Eggerss:

And so then they’re going to look to your Schedule D which is your capital gains report and see if you reported it on there, if it was in a taxable account. So they’re cracking down. Plus, when you go deposit money at the bank and it’s a lot of cash, more than $10,000, you have to fill out what’s called a CTR report-

Trey Ware:

No. I wouldn’t know anything about that.

Karl Eggerss:

… they’re wanting to do the same for Bitcoin. Yeah. They’re wanting to do the same for Bitcoin. They’re wanting to start watching people, who’s putting money into their cryptocurrency accounts. More than 10,000-

Trey Ware:

Well, of course they do.

Karl Eggerss:

I think the biggest risk is still a lot of regulation on cryptocurrency. So for all those reasons, we’ve seen a tremendous blow back-

Trey Ware:

Let me ask this question. Do, we need cryptocurrencies? Is it going to catch on and take off? When you’ve got Venmo and you have PayPal and every card in the world, you can pay everything online, you don’t have to do … What do you need a Bitcoin for? What do you need cryptocurrency for? Why have it?

Karl Eggerss:

Well, I’ve been saying for a while, cryptocurrencies, they’re not currencies yet. You can’t have a currency fluctuating 50% in a couple of weeks. So it’s not a currency. It may be an asset category and may be a diversifier for your investments, like gold or real estate or something like that. But they are not currencies. Some are being used that way, but they fluctuate way too much, Trey. Would you really want a loaf of bread to go up 50% at cost?

Trey Ware:

It already is.

Karl Eggerss:

[crosstalk 00:04:02] But we can’t have that type of fluctuation in a “currency.”

Trey Ware:

Right.

Karl Eggerss:

… and people take it seriously. So we’re a long way away from that. Plus, do you really think the US government wants to shift to something that has a limited supply? They like printing the money. That’s where all the helicopter money has come from the last few months [crosstalk 00:04:19] do these stimulus programs. They need something they can print more of, but cryptocurrencies are not that-

Trey Ware:

I can only imagine the Fed would be, would be away from that as well. Because, the Fed controls everything through the printing and tightening of money. That’s what they do. Karl, I got to let you go. Thank you very much. Karl Eggers from creatingricherlives.com.

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