How will we pay for our mail order fentanyl now that crypto is cratering?
“Cryptocurrencies Melt Down in a ‘Perfect Storm’ of Fear and Panic” (NYT, today):
A steep sell-off that gained momentum this week starkly illustrated the risks of the experimental and unregulated digital currencies.
The problem is not that a string of random bits has no inherent value, in other words, but that the U.S. government is not regulating Bitcoin.
(For those that argue that fiat currency has no inherent value… you need it to pay your taxes, without which you will be put in prison. So its inherent value is at least whatever your freedom is worth to you.)
The price of Bitcoin plunged to its lowest point since 2020. Coinbase, the large cryptocurrency exchange, tanked in value. A cryptocurrency that promoted itself as a stable means of exchange collapsed. And more than $300 billion was wiped out by a crash in cryptocurrency prices since Monday.
The crypto world went into a full meltdown this week in a sell-off that graphically illustrated the risks of the experimental and unregulated digital currencies. Even as celebrities such as Kim Kardashian and tech moguls like Elon Musk have talked up crypto, the accelerating declines of virtual currencies like Bitcoin and Ether show that, in some cases, two years of financial gains can disappear overnight.
The moment of panic amounted to the worst reset in cryptocurrencies since Bitcoin plummeted 80 percent in 2018.
It recovered from the 2018 crash so we just have to buy and hold? 16 percent of Americans agree:
During the coronavirus pandemic, people have flooded into virtual currencies, with 16 percent of Americans now owning some, up from 1 percent in 2015, according to a Pew Research Center survey. Big banks like Northern Trust and Bank of America also streamed in, along with hedge funds, some using debt to further juice their crypto bets.
But crypto’s decline is more severe than the broader plunge in the stock market. While the S&P 500 is down 18 percent so far this year, Bitcoin’s price has dropped 40 percent in the same period. In the last five days alone, Bitcoin has tumbled 20 percent, compared to a 5 percent decline in the S&P 500.
Let’s go back to January 2021 when I wrote Bitcoin being pumped up a fraudulent Tether? Bitcoin was then valued at $36,000. Today it is quoted at approximately 30,000 Bidies (mini dollars). How’s Tether doing? Actually not too bad!
This week, Luna lost almost its entire value. That immediately had a knock-on effect on TerraUSD, which fell to a low of 23 cents on Wednesday. As investors panicked, Tether, the most popular stablecoin and a linchpin of crypto trading, also wavered from its own $1 peg. Tether fell as low as $0.95 before recovering. (Tether is backed by cash and other traditional assets.)
Regulators say that more regulation is the answer:
“We really need a regulatory framework,” Treasury Secretary Janet Yellen said at a congressional hearing on Thursday. “In the last couple of days, we’ve had a real-life demonstration of the risks.”
Why would it make sense for the folks in Washington, D.C., who have failed to maintain a stable value for the U.S. dollar, to try to monkey with Bitcoin? People who want a currency that is subject to the regulation and manipulation of technocrats in D.C. already have one: the U.S. dollar.
Would any HODL readers like to make the case for buying cryptocurrencies right now? If so, which one(s)?
Crypto Believer at the local strip mall this evening… (I was at PetSmart)
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