US banking giant Wells Fargo has been ordered to pay $3.7 billion for illegal activity. Federal regulators have fined the institution $1.7 billion for “widespread mismanagement” over multiple years. Additionally, Wells Fargo needs to pay $2 billion to its customers that it ripped off.

The bank’s widespread mismanagement includes wrongfully repossessing customers’ vehicles, denying thousands of customers loan modifications leading to their homes’ foreclosure, illegally charging overdraft fees, and freezing over 1 million bank accounts, locking out clients for an average of two weeks.

There’s a decent chance you may not have heard or read a lot about this record fine. It got some press the day it was announced but has since barely been mentioned in mainstream media outlets.

Further, this is not the first scandal that the “too big to fail” Wells Fargo has been charged with. And, unknown to many, Wells Fargo and other banking institutions have a long history of being fined for illegal activity. Oh yeah, they also caused an enormous financial crisis in 2008.

Banks have been ripping us off for years through their everyday business operations. But too many people willingly succumb to banks’ financial sector dominance or don’t understand they have an alternative option independent of dishonorable banking institutions.

The alternatives I am referring to are Bitcoin and crypto. Bitcoin and crypto have some things that banks do not have. First, there is a public blockchain recording all activity and transactions. Second, no executive teams benefit from charging illicit fees or stealing their clients’ funds. And, perhaps most importantly, Bitcoin and crypto allow people to take custody of their wealth.

Traditional finance outlets like banks have customers. Bitcoin and crypto have users. The more people take accountability for their wealth; the less banks can manipulate those funds away from us.

Bitcoin’s bad 2022

Bitcoin has performed poorly in 2022, falling 75% from its all-time high. As a result, many investors who bought in at much higher prices aren’t feeling so good about their decision to diversify into crypto. Further, the misconduct by centralized institutions in the crypto space, including FTX, Celsius, BlockFi, Voyager, and others, have left a lot of us with a bad taste in our mouth.

Unlike the Wells Fargo misconduct, the crypto space has received extreme criticism and fear-mongering. At its peak, Bitcoin had a fully diluted value of $1.45 trillion. At the time of writing, the current valuation reflects a $1.1 trillion loss of value. This is a lot of money!

But Bitcoin isn’t alone in this value collapse. Tesla, Google, and Meta (the stock formerly known as Facebook) have each lost $800 billion in market cap from their peak valuations. Apple has lost $1 trillion worth of market cap. Bull market stock darlings like Zoom and Peloton are down over 90% from their peak valuations.

With these massive drops, Bitcoin and Tesla get the most press. Tesla’s drop illustrates the danger of having a centralized institution reliant on one person. CEO Elon Musk’s inconsistency and radical behavior have cost investors significant sums.

Why could this drop benefit Bitcoin retail investors?

Bitcoin has lost $1.1 trillion in value in a year. It’s getting negative press. And now, because of Sam Bankman-Fried and other centralized institutions in crypto, regulators may come down on the space with a heavy hand.

Is this price drop a good thing for retail Bitcoin investors? And if it is good, how and why would it be good? Finally, could this opportunity be a chance for ordinary investors to establish our positions before Bitcoin’s next leg is higher?

There are three main reasons I see the price drop in Bitcoin being a boon for retail investors. Before I highlight the reasons, for the sake of this article, a retail investor is someone who holds less than 10 BTC. At the time of writing, that is $167,000 or less worth of Bitcoin.

Reason #1: Bitcoin holders with conviction remain in the market

If you are an investor who bought Bitcoin at $40,000 or higher and is still holding it today, it shows that you have a high conviction level in the asset. Because Bitcoin’s supply is limited and most Bitcoin has been mined, the greater the number of strong holders, the higher the price floor in Bitcoin.

Most of the leverage has been flushed out of the market. This means that more people accumulating Bitcoin today are likely investors, not speculators.

Further, if a new investor buys Bitcoin or an existing retail investor increases their Bitcoin, their downside risk should be lower because so much of Bitcoin’s value has evaporated. After all, if someone has held Bitcoin from $40,000 to $16,000 and the price drops another $4,000, is that enough to shake them out of the market?

Reason #2: It allows retail to control more of the Bitcoin ownership and improves price stability

Distribution is one of the most critical metrics for Bitcoin to succeed. If the majority of the Bitcoin supply is owned by Microstrategy and Bitcoin whales, it means they have increased control over the price.

As more retail buyers own Bitcoin, we can set the price on what we perceive the value rather than get manipulated by prominent players looking to pump and dump.

Stability should increase because it will become a mutually assured destruction scenario. For example, it appears Elon Musk overpaid for Twitter. However, since he was the biggest Tesla shareholder, it has destroyed Tesla stock since he dumped billions worth of TSLA to finance his overspending.

Meanwhile, if Bitcoin ownership is more distributed, the market is less likely to have knee-jerk reactions from a few big whales.

Reason #3: More people are going to Bitcoin as they realize the alternative is neverending inflation.

Savvy people who recognize that their fiat currency has been devalued terribly in the past couple of years should be wondering how to avoid this predicament. Owning Bitcoin is a compelling response for people who can look beyond six months in the future.

As more people buy and hold Bitcoin, institutions will be required to pay more when they finally jump in with both feet. Traditional finance is licking its chops to get into Bitcoin. The fees they can generate and the upside Bitcoin price potential are tremendous. They understand this.

However, they haven’t received the green light from regulators. Once regulations are created and understood, they can go to work squeezing retail investors out of their money on transaction fees, custodial fees, management fees, lending fees, and more.

Key Takeaways

Bitcoin and crypto are not the only beaten-up asset class during this central bank-induced re-pricing of everything. Even though stocks like Apple, Meta, Google, and others have been trounced, few in the media say that they will drop by another 50–75% from where they are today. However, bearish calls on Bitcoin are 100% safe because the price going down mainly impacts retail Bitcoin owners and whales.

If retail doesn’t pick up the reigns on this opportunity and regulations get passed, we may live in a world where Bitcoin becomes just like the stock market. It gets controlled by a small group, and its value is determined by how much money central banks print. But, on the other hand, if retail continues getting its act together, Bitcoin can empower its owners with wealth and a level of control.

Am I being too idealistic here? Is it realistic to think retail investors will take the time and effort to understand Bitcoin’s potential benefits? Is the mass media hyping the Bitcoin fear to attract viewers, or do you think they have ulterior motives? And do you think the banks will start acting ethically now that billions in fines are being placed against them?

Share your thoughts in the responses.