Crypto crash: How a teacher’s dream investment turned into a nightmarish loss

“If I had sold it all, I would have had a quarter of a million pounds,” Duncan* says ruefully of the staggering value of his cryptocurrency holdings earlier this year.

Like many amateur investors, the 47-year-old former schoolteacher dabbled in cryptocurrency in a big way during the coronavirus pandemic, investing his life savings in a portfolio that was ballooning in value and which he believes would allow him to get on the market. property scale.

“I wanted to reach $500,000 (£414,000) and then withdraw half. I had over $300,000 around Christmas,” says Duncan.

However, speaking from his home in Edinburgh, he admits to having lost almost everything in the recent rout in the digital asset market. He ends up with a wallet worth (at the time of writing) around £4,000 – a fraction of the estimated £40,000 he has paid. He remains optimistic: “I have friends who have lost eight-figure sums of money.

Duncan is one of a growing number of Britons investing in digital assets. At the start of 2021, it is estimated 2.3 million people in the UK had crypto investments, according to a study by the Financial Conduct Authority (FCA) published last year, which remains arguably the most comprehensive official study of its kind. It is clear that the number will have increased since then.

The FCA then said the profile of crypto investors was skewed towards men over 35 and AB social class, with the median standing at around £300 – suggesting that many people had only done “ dip their toe in the water” as opposed to investing their life savings.

The study found that cryptocurrencies have become more normalized, with fewer people viewing them as a “gamble” and more as an alternative or supplement to traditional investments. As ownership increases, the FCA study, which preceded this year’s global cryptocurrency crash, highlighted a declining level of understanding, suggesting that some did not fully understand what they were buying.

Alice Haine, personal finance analyst at the investment platform bestinvestasserts that cryptocurrencies are still evolving as an asset class and are a more speculative investment than investing in the stock market.

“The steep falls seen in crypto stocks were partly a reflection of the fact that this is a market, unlike equities, that is dominated by retail investors,” she says. “With fears of inflation and recession growing, many investors liquidated their holdings for fear of further price declines, but also to bolster bank balances and savings pots to help them weather the global crisis. Cost of life.

“Any investor considering adding cryptocurrencies to their portfolio should be fully aware that this is an extremely volatile market, with price often extremely unpredictable.”

As more retail investors get involved, the government is changing the law to place advertisements for crypto assets under the same rules as other financial promotions such as stocks, shares, and insurance products. The move follows concerns about misleading cryptocurrency advertisements.

Meanwhile, Treasury select committee MPs recently launched a survey of the role of crypto assets United Kingdom.

“In recent months, the value of most crypto assets has fallen dramatically,” Mel Stride, chairman of the committee, said last month. “We will explore the opportunities and risks that crypto presents, where additional regulation may be needed, and lessons the government can learn from other countries.”

Duncan was introduced to bitcoin by a friend in the early 2010s when the cryptocurrency was worth around a hundred dollars. He saw its value take off in 2017, and when it topped $10,000, he thought, “This thing must be legit. I have to start buying it.

He had returned to the UK in 2014 after teaching abroad for more than a decade and found many of his friends had settled down and bought houses.

“I had a fun life and wasn’t saving for the future…Crypto was my chance to catch up.”

In 2017 he was investing £100 ‘here and there’ but in 2018 when the market crashed he stopped. “I was always interested in crypto and the idea that you could control your financial destiny rather than just trying to save money.”

From 2019 he started investing more regularly again, and by the following year he was hoarding £400 a month. It was turning into a healthy nest egg. His early investments were in bitcoin and ethereum, but in 2021 he entered Luna and owned “2,000ish” coins which in May dropped from $85 to under $1.

The idea of ​​decentralized finance or “DeFi”, promoted in crypto circles, appealed to a worldview shaped by the 2008 financial crisis.

“You can do things in DeFi that you can’t do in the traditional financial system,” Duncan says, giving the example of how easy it was to borrow against crypto compared to the process involved in getting credit. of street.

Duncan admits he stopped maintaining his spreadsheets once he started doing well. “Even if I had cashed in as late as April, I would have had a quarter of a million,” he says. “No one saw it coming. In fact, that’s not true. People saw it coming…the bubble I was in didn’t see it coming.

The extent of Duncan’s losses was “stressful” and he returned to live with his family. “You know, there are different stages of grieving or whatever… Denial was definitely one of the stages, but then you accept it. All the paper profits I had, they’re gone – it’s in the past.

Now he “is reluctant to sell anything… Just because if I do it will result in a loss”.

He no longer teaches and, despite his devastating losses, remains convinced that cryptocurrencies will rebound – so much so that he is pursuing a career in the industry.

After all, he says, people lose money in the stock market all the time. On social media, popular refrains among crypto investors include “we’re still ahead” and “WAGMI… We’re all gonna get there.”

Duncan adds, “We’re still ahead.”

* Not his real name