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The Bitcoin Crash Cost the Winklevoss Twins About $1 Billion

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We’ve all become accustomed to the presence of bitcoin in our lives, even if we don’t completely understand what it is. For those unfamiliar, bitcoin is what is called a cryptocurrency, which is a medium of exchange that utilizes cryptography in order to secure transactions, transfer assets, etcetera. In short, it is a virtual currency—an alternative currency to the dollar and other national currencies around the world.

If you’re unfamiliar with the Winklevoss twins—Tyler and Cameron—they once accused Facebook founder Mark Zuckerberg of stealing the very popular social media platform from them; they co-founded HarvardConnection, the name of which was later changed to ConnectU.

They ended up trying to gain full control of Facebook by suing Zuckerberg, but ultimately failed to gain control. They alleged that Zuckerberg stole their ConnectU idea to create Facebook. All of this transpired in 2004, and they wound up receiving $65 million as a result of the lawsuit. They ended up becoming venture capitalists. What else are you going to do with $65 million, right?

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The twins are heavily invested in bitcoin, having invested about $11 million of the money they won into the cryptocurrency about four years ago. In case you’re thinking of investing your savings in cryptocurrencies, you might want to reconsider, as the pair has lost $922 million in the past month as a result of the crash of the cryptocurrency.

The twins made their investment in the cryptocurrency, and didn’t sell off any of it, instead waiting to see their investment increase in value. When they first used their millions to buy bitcoin, it was worth only $120. Thursday, it was worth almost $12,000, so in that sense it was a good investment.

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However, not too long ago, a bitcoin was worth almost $20,000. Had they sold their holdings then, they’d be a whole little richer. That said, don’t feel too bad for the twins, because they’re still filthy rich. Their investment has made them billionaires, at least by the bitcoin standard. Reportedly, their combined holdings are worth $1.4 billion.

It could be argued that the twins were getting greedy, simply expecting the value of the cryptocurrency to rise indefinitely. Their heavy investment in the cryptocurrency makes them particularly susceptible to fluctuations in the value of bitcoin, and its value is unsurprisingly unpredictable—after all, it is an alternative currency that isn’t backed by any nation.

Were the twins really just being a bit greedy? After all, having over a billion dollars between them should be enough for most people, right? Well, it seems as if they had bigger plans for bitcoin than just making an enormous fortune for themselves; the twins actually wanted to create what is known as an ETF (exchange-traded fund) for their holdings, but their application was rejected over concerns of fraud-related possibilities. Had it been approved, there would have been the possibility of institutional investments in the cryptocurrency.

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So the twins will be fine, which is great for them—we guess! They may not be as rich as they once were, but they’re still very rich. If they’re still each worth about $700 million, they are doing okay. So they lost a few hundred million—what’s the big deal?

According to reports, they’re still intending to hang on to their cryptocurrency holdings, as they think the value of bitcoin will rebound.

So the twins will be fine. Things haven’t worked out so great for other investors, though; after all, bitcoin is not worth nearly as much as it was just a month ago, which means a lot of people have lost a lot of money.

There are other cryptocurrencies, too, such as Ethereum and Litecoin. They haven’t been doing so great lately, either.
So investing in cryptocurrencies doesn’t seem like a wise move this month, whereas it did just a couple of short months ago? Why is that the case? Why has bitcoin lost so much of its value?

A lot of it has to do, weirdly enough, with South Korea, and the fears of a regulatory crackdown. South Korea, you see, is one of the cryptocurrency’s hottest markets. There is concern in the country over matters like money laundering using the cryptocurrency, so officials are threatening to close the exchange of the virtual currency.

It is all a very complicated matter, and the whole idea of cryptocurrency is new to society. You really have to ask yourself: what is the point of this new type of currency? Countries probably can (and will) declare cryptocurrencies illegal—and maybe they should—as there is no regulatory body governing their use.

Is bitcoin even that valuable as a currency? Yes and no. You can’t exactly buy a lottery ticket most places with it, but there are actually a number of companies that accept bitcoin in lieu of “real” currencies. An example is expedia.com. You can use bitcoin to book hotels on the website. Microsoft also accepts bitcoin; you can use the currency to buy games and movies for your XBOX and Windows computers. Also, eGifter will allow you to purchase gift cards via bitcoin. Overstock.com allows you to buy things like televisions and laptops using bitcoin.

Still, you have to wonder about the future of cryptocurrencies. We do live in an age where we’re paying less and less with cash, but it is still nice to be able to hold a coin or a bill in your hand. Will bitcoin and other cryptocurrencies forever change how we think about money? That remains to be seen. One thing is certain, however: investments in bitcoin are not the safe bets that they seemed to be just a couple of months ago.

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Written by Kevin Barrett

Kevin Barrett is an award-winning reporter currently residing in one of the many suburbs of Philadelphia. In addition to working in journalism, he was worked in higher education and logistics. He is single, but does have a distracting little dog who keeps him from achieving maximum productivity.

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