It's hard not to feel a bit of schadenfreude regarding the ongoing collapse of billionaire fortunes. Huge fortunes that were worth GDPs of entire nations have been destroyed in a matter of months. Some examples from Bloomberg:
- Brian Armstrong: once worth $13.7 billion, now worth $2.2 billion
- Michael Novogratz: once worth $8.5 billion, now worth $2.5 billion
- Changpeng Zhao: once worth $96 billion, now worth $11.6 billion
Tyler and Cameron Winklevoss, co-founders of Gemini – but more famous for their lawsuit against Mark Zuckerberg – have had 40% of their net worth destroyed.
(Now I'm not one to predict the market. If I were any good at predicting crypto's downward trajectory, I'd just short Bitcoin and collect my own fortune.)
To truly appreciate how much money has been lost, let's look at this chart for the stablecoin Terra USD – which has been championed by Novogratz.
Five days ago, Terra USD was worth $71.43. Right this moment, it's now worth $0.18. That's nearly a 99% drop in value. Put another way, it's worthless.
Someone out there is probably screaming, "Time to buy the dip!" in the futile hope that someone else will hold the bag. But there's no coming back from this. Terra USD is done.
It's worth acknowledging that for multi-billionaires, this isn't a big deal. To Changpeng Zhao, so what if he lost $84.4 billion? He's still a billionaire many times over.
But this bloodbath should serve as a reminder that the average billionaire may not be as financially savvy as the average Joe. Most are not billionaires because they have some knowledge inaccessible to you or me. They have their status because they took wild risks, received a big payout.
Those risks were by no means guaranteed. For every billionaire in the world, there's millions of would-be entrepreneurs living on instant noodles, missing their chance at fortune through bad timing or hard luck.
While it may feel good to point and laugh at billionaire follies, let's remember that many folks who have no solid cushion followed those billionaires into the abyss. They now have nothing. Their future retirement is gone.
Many believe that whoever lost in the crypto crash got what's coming to them. They made their bets and lost. I sympathize with this sentiment.
Yet no one is an island. This will have terrible consequences on the general market, and will soon affect people who have nothing to do with crypto.
In my 40-year-old life, I've already lived through several recessions. Each time one happens, it's due to wild volatility. Certainly, it's fine if an enterprising individual wants to take a risk for a big pay-off. But what about everybody else?
What society needs is a hedge against high risk volatile pursuits like crypto. It's okay if billionaires want to lose their fortunes. It's not okay to punish the majority of the working class living pay check to pay check for a billionaire's mistakes. As a hedge, I propose mutualization to counter the mania of volatility.