Cryptocurrency volatility makes it extremely challenging to value crypto wealth and made the Forbes rich list obsolete before it went to press.
Wealth is known to be fleeting but this is especially the case when it is linked to such volatile assets as digital currencies. On Tuesday this week, Forbes published a list of cryptocurrency’s wealthiest but as soon as the article hit the press, the list was already rendered obsolete due to the volatile market swings we have come to associate with the space.
This goes to illustrate the fact that sustaining this market as well as the fortunes made from it is no mean feat. As the Forbes report points out, the cryptocurrency world affords people from all sorts of backgrounds an opportunity to make a fortune overnight.
Why Assessing Crypto Wealth is a Challenge
While some are plain lucky investors who bought into the craze early on and held their investments, others are Silicon Valley big wigs. They differ in yet another key way from regular billionaires whose wealth is usually public knowledge as it is tied up in tangible assets or stocks.
Crypto billionaires are part of a vast anonymous community whose real life identities are hard to pinpoint and investment resources are also private. In addition to this uncertainty, the value of many digital currencies dropped substantial one day before the list was published.
Double-digit nosedives in these currencies meant that by this time most of these billionaires would in fact be back down to millionaire status. A case in point was the highest ranked individual, Chris Larsen, a founder of the Ripple network.
Only last month, he was estimated to be richer than Facebook’s Mark Zuckerberg when the price of the Ripple altcoin peaked, briefly displacing ethereum to become the second most valuable crypto by market cap.
This placed his net worth at slightly above $60 billion. But since that time, the coin has shed more than 80% of its value as at that time and by the time the Forbes rich list was released, his net worth had descended to about $8 billion. But only 24 hours later, the same invested holdings were worth approximately $6 billion.
An Optimistic View from an Early Riser
But fortunately, there is a silver lining to this glum cloud at least for some investors. While many find the volatility repellent and steer clear of the crypto industry for fear of loss, enthusiasts view it differently. According to Cameron Winklevoss, one of cryptocurrency’s wealthiest investors, nosedives offer a golden opportunity.
“If you look at a $100 billion market cap today, now last week it might have been more like 200, so it’s actually a buying opportunity, we think that there’s a potential appreciation of 30 to 40 times. A lot of people are starting to see that, they recognize the store of value properties. So we think regardless of the price moves in the last few weeks, it’s still a very underappreciated asset.”
Most of the names of the list were either platform founders in the industry or early adopters. For such ones, the current price nosedives in bitcoin and other cryptocurrencies are no reason for panic considering that these prices are way above those of previous years.
For the now famous Winklevoss twins, the price of bitcoin is currently over 70,000% of its value when they first started investing in 2012.