The Bitcoin Millionaires: Fortunes Of The Crypto Investors

Bitcoin has been on a wild ride since its creation in 2009. In 2021, its price surged to over $60,000, an eightfold increase in 12 months, before falling to half that value in a few weeks. This volatility has made it a desirable asset for the forward-looking gambling type. While some people have made millions, others have lost everything. Bitcoin is also highly energy-intensive, consuming as much electricity as entire countries, and has been criticised for its environmental impact.

Bitcoin's value is volatile

Bitcoins Value is Volatile

No Intrinsic Value

Bitcoin is a cryptocurrency that was created in 2009. It is a peer-to-peer cash system that is not backed by a government. Bitcoin's value is determined by supply and demand. The cryptocurrency is limited to 21 million coins by design, and the closer the circulating supply gets to this limit, the higher prices are likely to climb.

Susceptible to Investor Sentiment

Bitcoin's value is heavily influenced by speculation about price movements and investor sentiment. Media outlets, influencers, industry moguls, and well-known cryptocurrency fans can create investor concerns, leading to price fluctuations. Positive sentiment can cause Bitcoin prices to rocket, while negative sentiment or fear can trigger panic selling and significant downturns.

Market Maturity

Some seasoned cryptocurrency investors believe that the market is maturing beyond its chaotic formative years. As cryptocurrency evolves, insecure exchanges and underhanded practices are being stamped out, creating a stronger sentiment that pushes Bitcoin's price higher in the long term.

Investor Profile

Another factor contributing to Bitcoin's volatility is the profile of its investors. The barriers to entry into the crypto market are low, and anyone with access to the internet can begin trading. The post-COVID investing landscape has seen a rise in retail investors with newfound savings to invest, making the market less experienced and more susceptible to manipulation through misinformation.

Institutional Investment

The arrival of more institutional investors into the cryptocurrency ecosystem has had a calming influence on Bitcoin's volatility. As more money is invested by large investors, Bitcoin prices become more stable. However, Bitcoin and other cryptocurrencies are still capable of delivering massive price swings, and their volatile nature makes them a risky investment.

Some people lost everything

Bitcoin has been on a wild ride since its creation in 2009. The cryptocurrency, which allows people to spend or trade without the involvement of banks or other intermediaries, has seen massive swings in value. This has led to both spectacular gains and devastating losses for investors.

Some people who invested in Bitcoin have lost everything, falling prey to the extreme volatility of the cryptocurrency market. One such example is a former advertising agency owner in London, who chose to invest in Bitcoin after his agency folded. Initially investing £5,000, he eventually poured in a total of £23,000 as he became hooked on the potential profits. At its peak, his investment was worth approximately $1.2 million. However, his fortunes took a turn for the worse when the Bitcoin bubble burst at the end of January 2018, causing its value to plummet. As a result, he lost almost his entire investment and was left with only a fraction of what he had initially accumulated.

Another cautionary tale is that of a 32-year-old man from Abu Dhabi, who shared his story on Reddit. He took out a nearly $400,000 loan to invest in various cryptocurrencies, including Neo, Stellar, Litecoin, and Ethereum. Unfortunately, most of these coins lost 95% of their value, leaving him with massive debt. In his own words, he was "working for nothing" and had to repay the loan for years, serving as a stark reminder of the risks associated with investing in cryptocurrencies.

The stories of these individuals highlight the dangers of investing in highly volatile assets like Bitcoin. While some people have made substantial gains, others have suffered devastating losses. It is a zero-sum game, and the extreme volatility of the cryptocurrency market can quickly turn fortunes around. As Joseph Borg, president of the North American Securities Administrators Association, warned, investing in Bitcoin is a highly risky proposition, especially for individuals with financial responsibilities or those who cannot afford to lose their investments.

Some people became millionaires

Bitcoin's rise since its launch in 2009 has created a diverse set of millionaires. Here are some of their stories:

Roger Ver

Nicknamed 'Bitcoin Jesus' in cryptocurrency circles, Roger Ver is an early advocate of bitcoin, having made his fortune through heavy investment in bitcoin-related start-ups. He is a fan of bitcoin because it offers economic freedom from traditional fiat currencies and banking systems. Ver is estimated to be worth $520 million.

Charlie Shrem

Arguably the most influential bitcoin millionaire, Shrem purchased large quantities of bitcoin before its price explosion. He also founded BitInstant with help from Roger Ver. Shrem earned a cool $450 million from his investments. However, he was found guilty of money laundering for the infamous deep web marketplace, The Silk Road, and was imprisoned until 2016.

Dave Carlson

Dave Carlson is a former Microsoft engineer who founded MegaBigPower to mine coins. His operation was said to be earning around $8 million per month at its height. Carlson is worth an estimated $350 million.

Jered Kenna

A former US Marine, Jered Kenna bought his first batch of bitcoin for only 20 cents per coin, selling them for over $200 per coin. He went on to pioneer dark bitcoin mining pools, where individuals could invest anonymously in the digital currency. Kenna is estimated to be worth $300 million.

Winklevoss Twins

The Winklevoss twins, Cameron and Tyler, are known for their involvement in the early development of Facebook and their significant investments in bitcoin. They invested around 1% of the total circulating supply at the time, amassing substantial wealth as the value of the coin skyrocketed. They also co-founded the cryptocurrency exchange Gemini. The Winklevoss twins are estimated to be worth $1.5 billion each.

Changpeng Zhao

Changpeng Zhao, commonly known as CZ, is a Chinese-Canadian entrepreneur and the founder and CEO of Binance, the world's largest cryptocurrency exchange in terms of trading volume. He introduced the binance coin (BNB), which has gained widespread adoption. Forbes estimates CZ’s wealth at $10.2 billion, while some analysts believe he is much wealthier.

Brian Armstrong

Brian Armstrong is the co-founder and CEO of Coinbase, North America's biggest cryptocurrency exchange by trading volume. He co-founded the exchange in 2012 after quitting his job as a software engineer at Airbnb. Armstrong reportedly has a 19% stake in Coinbase and was estimated to be worth $11.4 billion by Forbes in June 2024.

Michael Saylor

Michael Saylor is the CEO of software firm MicroStrategy Inc. (MSTR). The firm began acquiring bitcoin in August 2020, with Saylor becoming a fierce supporter of the cryptocurrency. By December 2021, MicroStrategy had increased its holdings in Bitcoin to $3.5 billion. Forbes estimates Saylor's net worth to be $4.4 billion as a result of his bet on Bitcoin.

Kingsley Advani

Kingsley Advani went all in on bitcoin. He sold everything he owned, including his laptop, and purchased $34,000 worth of bitcoin in mid-2017, at the beginning of the massive bull run. Months later, he was a millionaire. He now travels between San Francisco, New York, and London, working as an advisor to startups in the cryptocurrency industry.

Erik Finman

In 2011, when Erik Finman was only 12 years old, he took $1,000 given to him by his grandmother and invested it in bitcoin. He first discovered bitcoin when he saw a man wearing a bitcoin shirt at a protest in Washington, DC. By the time he was 17, he was officially a millionaire. He is now a key investor in a Silicon Valley cryptocurrency startup and has a net worth of 8 figures.

It's a risky investment

Bitcoin is a risky investment, and investors need to be aware of its volatile nature and the potential for significant losses.

Firstly, Bitcoin is a highly volatile asset, with wild price swings. In 2022, the price dropped from almost $48,000 to lows of around $16,000. This kind of instability can make it an unsafe investment, especially when compared to more traditional assets. The price of Bitcoin is influenced by various factors, including interest rates, with the cryptocurrency often moving inversely to rate changes. For example, when the Fed raises rates, Bitcoin often dips as investors move towards safer options.

Secondly, Bitcoin is not backed by any governments or regulatory bodies, and its value is based purely on market perception. It is not tied to any physical commodity, like gold, and does not have the intrinsic value of a company stock, which usually has revenue-generating operations. This means that if the market sentiment turns against Bitcoin, it could lose its perceived value, and investors could lose a lot of money.

Additionally, Bitcoin is not as disaster-proof as some believe. If the financial system collapsed, governments would likely turn to tangible assets like gold, not Bitcoin, as a store of value. Furthermore, if a collapse took down the internet or electrical grids, investors might not even be able to access their Bitcoin.

The unregulated nature of Bitcoin is another risk. The lack of regulatory oversight means that investors are more vulnerable to fraud and scams, and there is no government body to turn to for help in these situations. For example, the FTC reported that nearly 7,000 people lost an average of $1,900 in cryptocurrency scams between October 2020 and March 2021.

Finally, the irreversible nature of Bitcoin transactions adds to the risk. If investors lose their wallet credentials or have them stolen, their Bitcoin could be gone forever, with no way to recover it.

In conclusion, while Bitcoin has offered the potential for high returns, it is a highly speculative and risky investment. Investors need to be aware of the significant downsides and be prepared for large losses. It is generally recommended that only those with a high-risk tolerance and a strong financial position consider investing in Bitcoin, and even then, it should make up only a small portion of their portfolio.

It's not backed by anything

Bitcoin is not backed by anything physical, like gold or silver. Instead, its value comes from its scarcity, the complicated mathematics underlying its blockchain technology, and its controlled supply.

Bitcoin was created as a way to conduct transactions without the intervention of a trusted third party, such as a bank or financial institution. It emerged amid the global financial crisis, which shook trust in banks and governments, and so its decentralised nature was perfectly timed.

Like the US dollar and most other fiat currencies, Bitcoin is backed by its value as a mode of payment. Its value is also derived from consumer confidence. The more people that believe in the crypto space, the more confidence there is in Bitcoin, and the more valuable it becomes.

Bitcoin devotees argue that its value comes from its scarcity, as its computer algorithm mandates a fixed cap of 21 million digital coins. However, critics argue that scarcity alone cannot be a source of value.

Unlike fiat currencies, Bitcoin is not backed by a government. This means that its value is not maintained by required tax payments. As a result, Bitcoin's value is more volatile and vulnerable to consumer confidence. If people lose confidence in Bitcoin, its value could drop dramatically.

Frequently asked questions