“My account was blown up, I lost everything, and now I don’t hold any cryptocurrency.”

A cryptocurrency player who invested in Bitcoin and Dogecoin lost all his capital after experiencing the collective plunge of cryptocurrencies on May 19 and quietly withdrew from the cryptocurrency circle.

Just a few days ago, he was still passionately discussing the direction of this bull market. To some extent, this player seems to be a microcosm of the entire cryptocurrency circle in the past 100 days.

Since the end of last year, especially since February this year, the cryptocurrency market has entered a bull market. From ordinary investors to capital giants, everyone has started to join this crazy gamble. In these short 100 days, countless crazy stories related to wealth and greed have been staged. In the past, young people were keen on making money by speculating in stocks and funds, but this year they want to try something more exciting - speculating in cryptocurrencies.

They enter with the purpose of making a lot of money, trying to become the pig standing on the vent of the wind. After all, in the arena of the currency circle, there are legends of getting rich overnight every day. In the words of the cryptocurrency industry, if you don’t participate in it, all you have is the “fun of being poor”.

But the bull market came and went quickly. On May 19, cryptocurrencies began to plummet. Within 24 hours, 580,000 people were liquidated, with a total liquidation amount of US$6.91 billion. Newcomers to the cryptocurrency circle felt for the first time that "the cryptocurrency circle is a meat grinder, and the ups and downs are too exciting."

In fact, cryptocurrencies are highly volatile, risky and prone to bubbles. Some people who participate in them become rich overnight, but many people become penniless and heavily in debt.

A long-time crypto player pointed out: "There is never any sympathy in the cryptocurrency circle, only sickles and leeks."

One day in the cryptocurrency world is like one year in the real world

There is a famous saying in the cryptocurrency world: One thought leads to heaven, one thought leads to hell.

Xiao Lin, who had just entered the cryptocurrency circle for three days, felt the meaning of this sentence for the first time on May 19.

Xiao Lin got into this by accident. On May 16, he was browsing Douyin when he accidentally saw a short video about the skyrocketing price of Dogecoin. He realized that by spending some money on food, he might be able to earn enough money for a lifetime of food. "It's exciting just to hear about it," so he immediately bet 10,000 yuan.

Unexpectedly, before he could make a lot of money, something terrible happened. At 5pm on the 19th, Xiao Lin, who had been watching the market, suddenly found that the rising green K-line turned red and began to move downward. Everything happened so fast that before he could understand what happened, Dogecoin fell by more than ten points in just ten minutes. Panicked, Xiao Lin had never seen such a scene before, and quickly sent a screenshot to the group of Dogecoin investors and asked the group members: "What happened?"

What Xiaolin didn't know was that he had experienced the biggest crash in the cryptocurrency market in recent months. On that day, the news of the cryptocurrency crash once became a hot search. Not only Dogecoin, but all cryptocurrencies plummeted, with Bitcoin falling below $30,000 per coin, a 24-hour drop of 30%; Ethereum fell below the $2,000 mark, a drop of more than 40%; and Dogecoin fell below $0.3 per coin, a drop of more than 40% within the day.

The cryptocurrency world was in mourning. Many newcomers who had just entered the cryptocurrency world felt the cruelty of the cryptocurrency world for the first time. In this crash, it was not only Xiaolin who suffered heavy losses.

Li Liang, who calls himself an ordinary gambler, suddenly received a notice on the evening of the 19th that his position was going to be liquidated. Li Liang hurried to cover his position, but it was too late, and hundreds of thousands of RMB were wasted. "I didn't dare to use a leverage of more than ten times or even dozens of times, I only used a leverage of three times. I didn't expect that there would still be problems."

In fact, like Li Liang, more and more people in the cryptocurrency circle are not satisfied with the general bullish and bearish bets, and have begun to play the "betting long and short" game with leverage of dozens or even hundreds of times. Leverage can increase the profit rate in the short term, but once a loss occurs, it will also face the situation of losing all the money. If the loss amount exceeds the deposit, then all will be forced to sell, that is, "explosion".

Data from Bitcoin Home shows that due to the sharp drop on the 19th, as of 7:30 a.m. on May 20, about 580,000 people had their positions liquidated in the past 24 hours, with a total liquidation of US$6.91 billion (approximately RMB 44.4 billion).

Three hours after the plunge, these cryptocurrencies began to rebound. But many people didn't hold on and were ready to sell before the price rebounded. A netizen who invested in Dogecoin posted a Weibo post complaining that he bought Dogecoin at $0.53, thinking he was buying at the bottom, but it plummeted right after he bought it, so he sold it at $0.27. Unexpectedly, Dogecoin rebounded right after he sold it, and it rose to $0.35. The meat was cut in vain, and he became a new leek.

The plunge had been foreshadowed. Market research firm Arcane Research said the decline in market sentiment came after the price of Bitcoin plummeted over the past week. After the price of Bitcoin fell below $50,000, the Bitcoin market has turned to "extreme panic."

Moreover, the country has recently begun to tighten control over cryptocurrencies. For example, the Financial Stability and Development Committee of the State Council made it clear at its 51st meeting that it would crack down on Bitcoin mining and trading, and resolutely prevent individual risks from spreading to the social field. After the news came out, the peripheral cryptocurrency market plummeted again.

A brief bout of wealth

Before this crash, the cryptocurrency market had been crazy for nearly half a year.

At the end of last year, especially since February this year, the cryptocurrency market ushered in a bull market. Bitcoin has been rising all the way, with the price exceeding $64,000 per coin at one point. The surge in Bitcoin has also driven up the prices of other cryptocurrencies.

What is different about this round of bull market from previous ones is that some altcoins that were originally created as a prank have gradually become popular.

For example, Dogecoin, a copycat coin created to satirize Bitcoin, has seen its price increase more than 100 times in just a few months.

What’s even more exaggerated is that Shiba Inu Coin (SHIB), which was inspired by Dogecoin, staged an absurd drama some time ago. Because Musk left a message on a tweet about SHIB, saying, “I’m looking for a Shiba Inu dog.” Subsequently, the price of SHIB soared. Moreover, at 17:00 on May 10, SHIB landed on Binance Exchange. Only ten minutes after it went online, the exchange announced the suspension of all withdrawals due to traffic overload, and withdrawals were not resumed until 17:34.

In addition to Shiba Inu Coin and Dogecoin, various types of Dog Coin, Fox Coin, Pig Coin, Ant Coin, Rabbit Coin, and even Pikachu Coin have emerged in an endless stream, even overshadowing mainstream cryptocurrencies such as Bitcoin and Ethereum.

The logic behind many people pouring into the cryptocurrency world is simple. One netizen pointed out, “Bitcoin has increased at least 400,000 times, creating many people with financial freedom. As long as you don’t use leverage and just put tens of thousands of dollars there, maybe it will change your life in a few years. Even if you lose money, it’s nothing.”

When Bitcoin was first released in 2009, the price was less than 1 cent, and 1 US dollar could be exchanged for 1,300 Bitcoins. By the end of 2017, it soared to 18,000 US dollars, and then fluctuated continuously. Since the end of 2020, it has experienced another round of crazy growth. In March 2021, Bitcoin has exceeded the 60,000 US dollar mark. Although it has recently fallen back to nearly 40,000 US dollars, it has still skyrocketed thousands of times. In other words, if you bought Bitcoin with the money for a pack of cigarettes in the early days, you are at least financially free now.

But now, Bitcoin is out of reach, and it is difficult for it to surge a thousand times. Everyone is counting on these altcoins and animal coins to turn around.

Moreover, more and more young people with no investment experience are joining this wealth carnival. Steven is a post-90s generation. He saw his colleagues around him buying Dogecoin and SHIB, so he also bought 600 yuan. Another post-90s generation player, Youzi, basically has no investment experience and does not know what cryptocurrencies and blockchains are. He only invested 400 yuan at the beginning, but was pleasantly surprised to find that his income quadrupled in two days. He realized: "This is my only chance to change my class."

As one Weibo influencer said: "After joining several SHIB groups, I found that most of them were born after 1995 and 2000. They hoard SHIB to buy hope. The traditional market tells me that houses maintain their value, but I can't afford them; people who make money in the cryptocurrency world tell me that Bitcoin maintains its value, but I can't afford it either."

On the eve of the crash, the restlessness of the entire market had reached its peak. The Terror and Greed Index developed by CNNMoney attempts to visualize the changes in the sentiment of the cryptocurrency market. Taking Bitcoin as an example, Bitcoin's Terror and Greed Index once reached 79, which means that the market is already very greedy (0 means "extreme fear" and 100 means "extreme greed").

Since the cryptocurrency market is so good, many young people made money on their first investment. Perhaps it was because the money came too quickly, and many people were dazzled by the huge profits. A financial V shared that many newcomers in the currency circle rushed in when they saw a good token project, but ended up being ripped off. However, these projects are often imitations of successful projects. For example, some so-called projects actually issued 10 billion coins, but these project parties may have 9 billion in their hands. When everyone bought in and the coin price went up, the project party of the pig-killing scheme sold the 9 billion in their hands instantly, and they could run away with the money without any cost. "This is a pig-killing scheme, but these newcomers in the currency circle often can't tell the difference. They only attribute the success of Shitcoin and Dogecoin to their own abilities. Because it was too easy to make money at the time."

Observing the wonders in recent months, an industry insider who has been paying close attention to cryptocurrencies pointed out: "When more and more people learn that cryptocurrencies can be invested, the bull market will actually come to an end. The crash will definitely come. I don't know the exact day, but I know it will definitely come."

I didn't expect that this day would come so soon.

Who can make money?

99% of the people who come to the cryptocurrency world want to get rich quickly, but getting rich quickly is not that easy.

"In fact, 90% of people don't get rich overnight. That is to say, they accumulate for a long time and then make a lot of money when the market is good." Pixar, who entered the cryptocurrency circle in 2017, pointed out. To put it bluntly, you have to pay tuition fees a few more times and be cut by leeks a few more times.

Another long-time cryptocurrency player, Xiaobin, also believes that: “Even though Bitcoin has risen from less than one dollar to nearly $40,000 per coin, there are actually not that many people who have become rich overnight.”

After all, the risks in the cryptocurrency world are too high and the temptations are too great.

Due to the lack of regulation and high liquidity, the price of cryptocurrencies fluctuates greatly. There are no price limits on cryptocurrencies, and they are traded 24 hours a day, 7 days a week, so the risks are far greater than those of the stock market.

Pixar entered the circle in 2017. He invested 100,000 yuan that year and lost only 20,000 yuan in the end. With such a painful experience, he realized that he needed to understand and learn blockchain knowledge in the currency circle, at least to know the operating logic inside, and to understand some knowledge in related fields such as finance and politics.

In addition to understanding cryptocurrencies, cognition and timing are also important. "How do you know when it reaches 3,000, is it going up or down? This is a matter of cognition. At the same time, timing is very important. If you bought it at the end of 2017, you need to wait for two years before you can see the dawn of rising in 2020," Pixar pointed out.

Moreover, wealth in the cryptocurrency world is like a roller coaster, coming fast and going fast. Especially after experiencing a low point and huge losses, being able to stay calm is a great test of one's mentality. For example, in 2017, Li Liang casually invested more than 10,000 yuan. At that time, the market was good, and the principal return was almost 100 times, with the highest return reaching seven figures. The money came too fast and too much. "I have never seen so much money in my life." Unexpectedly, the market of the entire digital currency suddenly deteriorated again. Li Liang panicked, and then started to play with leverage. In the end, the money he earned by luck was lost by strength.

The "leeks" chase the rising and falling prices, but in this game related to wealth, ordinary retail investors are basically at the bottom of the food chain. The real behind-the-scenes players are making a fortune in silence.

For example, whether the market goes up or down, the exchange owner will always make money. Take Coinbase, the largest cryptocurrency exchange in the United States, for example. On April 14, Coinbase was successfully listed. The financial report shows that the company's total revenue in the first quarter of 2021 was as high as 1.8 billion US dollars. Most of the revenue came mainly from transaction fees, and the profit was amazing. The net profit in the first quarter was 771 million US dollars, far higher than the 32 million US dollars in the same period last year.

In addition to exchanges, Pixar pointed out that mining farm owners are also making a fortune in silence.

The emergence of mining farms is closely related to the way Bitcoin is produced. Bitcoin requires producers to use a specific algorithm to "mine Bitcoin". In other words, whoever solves the problem correctly first can get the corresponding Bitcoin reward, first come first served. And the number of Bitcoins is limited. In the early days, virtual currency was easy to mine, and the electricity consumption of mining was not large at that time. But as mining becomes more and more difficult, the electricity consumption increases, and the energy consumption will also become very high.

In this mining game, many people bought mining machines, set up mines in areas with abundant electricity, and started large-scale mining. According to a report by the Wall Street Journal on February 17, the Chinese currently control 70% of the world's Bitcoin processing capacity. Cheap water and electricity resources have allowed the Chinese to sit firmly on the iron throne of mining.

"The owner of a mining farm is equivalent to holding a gold mine. He can hoard coins when the price is low and sell them when the price is high," Pixar pointed out.

In addition, many institutions and capital giants have also made a lot of money in this game. For example, Tesla has made a lot of money by speculating in Bitcoin. Tesla said that it sold part of the $1.5 billion worth of Bitcoin it bought in February in the first quarter, contributing $101 million in profits for the quarter. This amount is close to a quarter of the company's total profit for the quarter.

Not only Tesla has started to speculate in cryptocurrencies, more and more institutions have begun to join the cryptocurrency speculation army.

Since 2020, many overseas companies have begun to buy Bitcoin to fight inflation due to factors such as loose liquidity of global central banks. For example, in December last year, Ruffer Investment Management, a British investment institution with an asset management scale of US$27.3 billion, suddenly announced that it would invest 2.5% of its portfolio in Bitcoin.

But from the current situation, the good days of cryptocurrencies seem to be over. Domestically, the Financial Committee of the State Council has stated that it will severely crack down on Bitcoin mining and trading, and the United States is also preparing to crack down on people who use Bitcoin to evade taxes.

Although investing in cryptocurrencies is extremely risky and the real winners are the dealers and exchanges, believers are still enthusiastic about cryptocurrencies. After the crash, the gamble seems not to be over yet.

A Bitcoin player told Shenran: "I still firmly believe that the future of digital currencies, including Bitcoin, will be bright."

And as Nobel Prize-winning economist Paul Krugman said, Bitcoin is a cult-like digital currency that will always find new believers, and these believers will ensure its indefinite survival. "I have given up predicting the imminent demise of Bitcoin. There always seem to be new believers. Maybe they just treat it as a cult that can survive indefinitely."