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So how big is the crypto crash?

⊰ 2022-06-28 by ShaunO ⊱

Ian's doing his bit to redeem ABC standards; in this analysis piece he outlines quite well (best one can, given the lack of real information in this sphere) the nonsense that 'cheap credit' has created in speculative markets.

It did leave me with a big question though. If the asserted figures are true - crypto assets worth circa us$3 trillion dollars (US$T) in 2021, and now worth 1/3 of that - then what does that figure mean?

So we have two numbers - crypto assets today worth approx US$1T, and losses (over past year or so) estimated to be circa US$2T. How big is a trillion dollars in comparative terms?

Well, Australia has a total output (GDP) for a given year of around 1.5 trillion US dollars. World GDP per year is about $90 trillion US dollars, give or take us$10 trillion.

So a trillion dollars is 1.1% of yearly world output - not earth shattering, but not totally insignificant. And a loss in crypto of an estimated 2.2% of world output in one year (the circa US$2T figure) again is not an insignificant number. But it's not likely to bring the world economy to 'its knees'.

One thing about the 'not insignificant number' is, I think, that we can speculate that most of these losses are going to be born 'by the masses' (the poorest end of the economic demographic). Looked at in that light, then Ian may have a point - that is a lot of money to take out of the 'wealth' (or purse if you like) of the poorest end of the spectrum. And given 'that end of the demographic' is where the consumer spend mostly happens then an intelligent guess says you could expect a fairly large impact on 'demand' if indeed a couple of percent of world total GDP is "taken out of the demands ship's sails" over such a short period of time.

More evidence (if we needed it) that we're in, or looking at a nearby, recession?

buggered if I know 😛

Why the crypto crash could hit stocks


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