$714 billion have gone up in smoke.

Bitcoin plunged to $3,738 at the moment. Down nearly 40% from two weeks ago, and down 81% from peak-mania of $20,078 on December 17, 2017. It’s back where it had first been on August 12, 2017. It looks like a magnificent bubble that is imploding, but “bubble” is a misnomer; it’s a magnificent scam, where people paid a lot of money – many billions of dollars – to get an essentially useless digital entity whose price then dissolved into where it had come from.

This chart via CoinMarketCap shows the drama of bitcoin’s market cap surge to $333 billion on December 17, 2017 and the collapse to $64.9 billion now:

There are now 2,071 of these cryptos, according to CoinMarketCap, up from 1,926 when I last wrote about it on September 9, and up from 1,400 on January 17, 2018, and up from just a handful a few years ago. These cryptos are multiplying like rabbits.

And each of these cryptos, those that are still alive, is constantly adding new coins through “mining.” This mega-dilution impacts some serious real money.

Market cap for each crypto is figured by the current number of coins, multiplied by the current price. Since new coins are created all the time through mining, it also creates new market cap when the price is stable, and it covers up some of the damage on the way down.

In overall market cap terms, new cryptos are created all the time through initial coin offerings (ICOs) and other methods, and each of these adds new coins through mining. And the overall historic market cap is figured going backwards, based on today’s existing cryptos to arrive at a theoretical market cap at a date in the past.

Back in January 7, the actual market cap on that day for all cryptos combined was $704 billion, according to CoinMarketCap on January 7. Today, this market cap figure for January 7 has been inflated, by the process described above, to $833 billion. As of this morning, this market cap has plunged 86% to $116 billion. By this measure, $714 billion have gone up in smoke.

This has been an obvious scam that peaked in the period between the end of December 2017 and early January 2018 and has since collapsed. It was so obvious that even I could see it. And it’s not like I didn’t warn about this on the way up – and people who read these articles would have had plenty of time to get out while the getting was good. Here are some samples.

These articles attracted lots of crypto-trolls of which there was a nearly unlimited supply because that too is part of this scam: Everyone has to promote it.

Some of these promoters are paid, such as John McAfee who admitted in March that he charged $105,000 per crypto-promo tweet. That’s a lot of dough for a few seconds of work. Others did the promos for free, hoping to do their part to drive the prices of these 2,000-plus cryptos into the stratosphere.

Paid or not, a slew of them came to WOLF STREET’s comment section and cited intelligent-sounding gobbledygook “whitepapers,” made spurious arguments that were out of this world and defied gravity while claiming that the earth was flat or something. Plenty of them said nasty things. I blocked most of these comments because I didn’t want the comment section to become toxic. Some of them I let through to have a historical record about the nonsense spouted off by these promoters.

And for a while, some befuddled reporters in the MSM, in love with this “new technology” or whatever, supplied the super-horsepower needed to get the scam as far as it did last year.

Holdings of bitcoin are very concentrated among a relatively small number of large holders, such as bitcoin miners, hedge funds, and family offices. And many of these hedge funds and family offices, in their infinite wisdom piled into it late last year and then “leaked” the information that they had bought into it to create hype and drive up the price further. This was eagerly reported by the befuddled media.

But there is no liquidity in these cryptos. Just as these hedge-fund purchases last year caused prices to multiply due to lack of liquidity, efforts to get out from under these positions is causing the prices to collapse. In other words, these hedge funds and family offices are stuck, unless they want to cause the price to collapse further.

Here are the half-dozen largest cryptos by market cap, and their percent plunge since their respective peaks. These are among the most alive. Hundreds of cryptos have already died:

Bitcoin (BTC): -81% Ripple (XRP): -91% Ethereum (ETH): -92.4% Bitcoin Cash (BCH): -96% EOS (EOS): -85% (I ripped its stupendous ICO last year) Stellar (XLM): -85%

Certainly, they will bounce again, as they have before, enough to give folks some hope, before they will re-collapse when some of the big money is gingerly trying to get out without totally crashing the entire space. But for anyone trying to get some money out of the crypto space, new money – dollars, euros, yen, won, etc. – must flow into the crypto space in the same amounts. And it’s going to be harder and harder to get people excited about throwing their money at this scam.

Enjoy reading WOLF STREET and want to support it? Using ad blockers – I totally get why – but want to support the site? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:

Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.