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?
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There are two different but related things happening.
Some crypto exchanges are ponzi schemes. People spend money to buy “crypto”. The website shows them a number that represents how many coins you have. That number keeps going up exponentially, but it’s just fake. They haven’t really invested any coins in the market at all.
Suddenly, it collapses. People get jittery and decide to withdraw all of their crypto as cash. The first few lucky people are able to do so, they come out ahead – for example, one person invested $1 million a year ago, they withdraw $2 million. But then the money runs out. Everyone else is left with nothing.
When this happens, it tends to drag the price of all crypto down, but that’s not quite the same.
The price of one Bitcoin at the beginning of the month was about $20k. The price of one Bitcoin today is around $16k. So if you’re holding a lot of Bitcoin, it’s worth less.
Where did that money go? Well, if you look at it in terms of dollars, you gave your dollars to someone else when you bought a bitcoin for $20k. Now they have $20k and you have one Bitcoin. If you sell a Bitcoin today for $16k, someone else has one Bitcoin and you have $16k. No US dollars were created or destroyed. All that happened is that the value of one Bitcoin changed. It’s no different than buying a car for $20k and it only being worth $16k when you try to sell it later.
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