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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Instead of cryptocurrency, let’s imagine you invest in apples. You buy some apples for $100. The money already went to whomever sold the apples, but you can still say you have $100 worth of apples.
Now imagine you were waiting to find someone who’d buy your apples for $200, but that never happens, the apples rot, and now they’re worthless. $100 was lost in the apple market, but the transfer of money happened long before the loss.
It goes to the same place where the money that made everyone rich came from in the first place.
This is the problem with the stock exchange and “evaluation” based markets, the value is not tied to anything, like it never existed.
Your analogy misses that everything is worth as much as someone willing to pay for it.
This is why pump and dump scams are theft, because people put in money when they bought the crypto then someone sells a huge amount, that money comes from the people who put in money. Then the value tanks and the poeple who put in money can’t sell their “posessions” anymore.
The value of crypto or any currency comes from the belief that someone in the future is willing to give something for it, another currency or services.
That value is not real, nothing is backing it up, just the commonly held belief. Buying and selling is what keeps this belief afloat and keeps money in circulation. But when the belief is gone, the currency collapses and when noone is gonna give you anything for the currency, that value is gone.
But yes you are right “In this case, wouldn’t someone/some groups of people get all the money that is currently being lost?” when people were buying that currency the money goes to either people already having the currency and selling when it is high, or to the people who “mint” the crypto initially. That is the danger of crypto and “fiat” currencies. You can make some out of thin air.
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.
1. crypto is only worth what someone is willing to pay for it
2. crypto isn’t the only thing you can buy
let’s imagine you sell me that $100 of crypto and I turn around to sell it for $1. that $99 difference doesn’t just disappear.. it just gets spent on other stuff like clothes, gas, someone’s wages. the money is still at the poker table, its just being controlled by different people at the table.
The flaw in your understanding is thinking that someone bought all the crypto at some time. This is not the case.
Let’s say I dig up a lump of gold. Is it worth anything? Only if I can sell it. If I keep it and never sell it I can claim that it’s worth $1000.00 because other people have spent that much on similar lumps of gold. But if suddenly people say gold isn’t worth anything, my lump can’t be sold so it is worthless.
And worse than that I’m out the $25.00 I spent on the shovel.
The “fake value” stuff is true, but it’s not the only thing. People are making money by exploiting the crypto market, including me, using things like [DeFi liquidity farming](https://midas.investments?p=0223) wherein essentially people pay ridiculous amounts in order to prop up their new cryptocurrency in the hopes that they’ll make it big and get a huge return, while platforms like the previously linked Midas take the cash and give it to their users in USDC. It’s pretty fun watching crypto go to shit while I continue to make money off it hand over fist.
The value of money you held is lost. If a country A takes over country B the money of country B now holds no value. The currency is deemed void by the country taking over. In crypto the value is more of hype or people’s interest. Government not allowing to trade in crypto peoples interest is lost value of the crypto is lost. You still hold the crypto its just its trade in dollars or other currency will not get you as much when it was very hyped
The total amount of money isn’t fixed. It’s also not tied to the total amount of value. The total amount of money is a quantity that follows few rules.
Once that’s out of the way, you realize that, when money disappears from one place, it doesn’t necessarily go somewhere else. It can just… poof… gone.
So the trillions lost in the overvaluation of coins are just lost. And the people that overvaluated them just don’t get anything in return for their failed investment. That’s a thing with speculation. You make some predictions about the future, bet money on it. If your bet is correct, you can cash in by selling the stuff you bought much more expensive than you bought it (to people that make the bet it will keep increasing in value). If your bet was incorrect, you need to accept the fact that you’ll sell at a loss.
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