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What will actually happen if the crypto coins collapse in price? What tangible effects will there be? Very few people's salaries are paid in crypto, crypto isn'

What will actually happen if the crypto coins collapse in price? What tangible effects will there be? Very few people's salaries are paid in crypto, crypto isn't backing people's mortgages, and outside of the rare (and newsworthy) cases, people are not investing extreme amounts of money into crypto that they cannot possibly afford to lose. I have a hard time imagining what actual tangible disasters will happen if crypto currencies lose their value overnight besides some speculators losing money and some mining centers closing.

Ekaros 6y ago
Is there even any significant amount of debt backed by crypto? As otherwise it is just money that some have spend and others have gained... Ofc, there are some energy producers that will be hit and some manufacturers. But I wouldn't be too worried about later, they should be able to pivot to other chips in current market.
pfisch 6y ago
Now do gold.
onlyrealcuzzo 6y ago
What will happen is 2% of the world's "wealth" would disappear - which would almost certainly spill over causing a much larger decline. From 2007 to 2008, for example, global wealth declined about ~10% [1]. There's not much room left for central banks before we officially enter banana town. If cyrpto implodes, it could easily be worse than the financial crisis - which means, regulators have an interest in it NOT imploding. [1] https://www.credit-suisse.com/about-us/en/reports-research/global-wealth-report.html https://www.credit-suisse.com/about-us/en/reports-research/g...
- pbourke 6y ago
  In no way, shape or form would a crypto implosion be anywhere near the financial crisis in impact. It’s just not systemically important. It’s essentially “phantom wealth” not underpinned by any economic reality - even more unglued from reality than esoteric derivatives.
AnimalMuppet 6y ago
No real damage (except to those holding it) unless enough people have bought crypto with borrowed money. That's where it can cause damage to the overall economy.
- lazerpants 6y ago
  The Wealth Effect is a real consideration here. During 2007 people cut their spending considerable because their houses went down in value, even if they were not, at that time, trying to sell their home. You would see the wealth effect work similarly if cypto assets were devalued. As an example, I have 5-20k in crypto assets on any given day. My wife and I are also shopping for a new couch. If my crypto assets evaporated we would not be shopping for a new couch, nor would we be going out for dinner tonight, despite the fact that I am not spending down crypto assets to fund either of those purchases. The psychology behind it is that people adjust to a certain amount of "savings" and will adjust purchasing to get back to that level if their savings changes quickly and substantially. https://en.wikipedia.org/wiki/Wealth_effect https://en.wikipedia.org/wiki/Wealth_effect
  - pbourke 6y ago
    60% of Americans (roughly) own real estate. It’s by far their largest asset. What proportion of Americans own crypto and how much of their net worth does it comprise? That would show you how significant the wealth effect would be.
waynesonfire 6y ago
there is this concept termed "too big to fail" -- we're seeing crypto start to find it's way into ETFs.. and then 401Ks.. and then ops. https://www.barrons.com/articles/a-new-crypto-etf-is-here-you-wouldnt-know-it-from-the-name-51618433774 https://www.barrons.com/articles/a-new-crypto-etf-is-here-yo...

Ekaros 6y ago

Is there even any significant amount of debt backed by crypto? As otherwise it is just money that some have spend and others have gained... Ofc, there are some energy producers that will be hit and some manufacturers. But I wouldn't be too worried about later, they should be able to pivot to other chips in current market.

pfisch 6y ago

Now do gold.

onlyrealcuzzo 6y ago

What will happen is 2% of the world's "wealth" would disappear - which would almost certainly spill over causing a much larger decline. From 2007 to 2008, for example, global wealth declined about ~10% [1]. There's not much room left for central banks before we officially enter banana town. If cyrpto implodes, it could easily be worse than the financial crisis - which means, regulators have an interest in it NOT imploding. [1] https://www.credit-suisse.com/about-us/en/reports-research/global-wealth-report.html https://www.credit-suisse.com/about-us/en/reports-research/g...

pbourke 6y ago
In no way, shape or form would a crypto implosion be anywhere near the financial crisis in impact. It’s just not systemically important. It’s essentially “phantom wealth” not underpinned by any economic reality - even more unglued from reality than esoteric derivatives.

AnimalMuppet 6y ago

No real damage (except to those holding it) unless enough people have bought crypto with borrowed money. That's where it can cause damage to the overall economy.

lazerpants 6y ago
The Wealth Effect is a real consideration here. During 2007 people cut their spending considerable because their houses went down in value, even if they were not, at that time, trying to sell their home. You would see the wealth effect work similarly if cypto assets were devalued. As an example, I have 5-20k in crypto assets on any given day. My wife and I are also shopping for a new couch. If my crypto assets evaporated we would not be shopping for a new couch, nor would we be going out for dinner tonight, despite the fact that I am not spending down crypto assets to fund either of those purchases. The psychology behind it is that people adjust to a certain amount of "savings" and will adjust purchasing to get back to that level if their savings changes quickly and substantially. https://en.wikipedia.org/wiki/Wealth_effect https://en.wikipedia.org/wiki/Wealth_effect
- pbourke 6y ago
  60% of Americans (roughly) own real estate. It’s by far their largest asset. What proportion of Americans own crypto and how much of their net worth does it comprise? That would show you how significant the wealth effect would be.

waynesonfire 6y ago

there is this concept termed "too big to fail" -- we're seeing crypto start to find it's way into ETFs.. and then 401Ks.. and then ops. https://www.barrons.com/articles/a-new-crypto-etf-is-here-you-wouldnt-know-it-from-the-name-51618433774 https://www.barrons.com/articles/a-new-crypto-etf-is-here-yo...