From what understand, money doesn’t just disappear. When you’re at a poker table playing, the sum of money everyone started with is the same at the end(when someone loses $100, other(s) gain $100). If I sell you a crypto for $100 and it drops to $0, I would still have your $100. In this case, wouldn’t someone/some groups of people get all the money that is currently being lost?
In: 6
Using the housing market as an analogy;
Imagine you buy a house for $250,000 then 2 years later the market crashes.
If there is no one left who is willing/able to pay that price for the property, and the maximum you can realise at sale at that point in time is $150,000, then you have lost $100,000 on your original investment.
You still have the asset which COULD give you a full return on investment, or see you in profit, if the market recovers and you sell at a later date meaning that, in real terms, you haven’t lost or gained anything until you actually dispose of the asset.
The same is true for crypto currencies but the difference is that, while many people will HAVE TO dispose of their property at some point (i.e. they’re moving away, they can’t afford the mortgage after a change in circumstances, they need more space because of a growing family, etc.), there aren’t many reasons that someone would HAVE TO dispose of crypto and realise a loss on their original investment.
So really $100, dropping to $0, isn’t a loss of $100 but a POTENTIAL loss of $100 if you had to sell, due to the drop in VALUE of the asset.
Latest Answers