Why Did Crypto Collapse? (And Will It Rise Again?)
The model of decentralized currency appeals to some. However, as a practical matter, a central regulatory authority controlling currency can in many cases be useful.
Cryptocurrency is having a rough week. After noted billionaire, Tesla CEO and cryptocurrency fan Elon Musk grudgingly admitted that Dogecoin, 2021’s most successful coin, was “a hustle” during his Saturday Night Live appearance on May 8, the price of the currency abruptly collapsed, from an all-time high of 74 cents to a low of 27 cents two weeks later, a decrease of 270 percent.
Other cryptocurrencies were soon to follow. Ethereum collapsed from $4500 to under $2000; Bitcoin, the largest and most successful token, fell from nearly $60,000 to $32,000 over the same time frame. These wild fluctuations have caused many of crypto’s gains since the beginning of 2021 to evaporate, and although their prices are beginning to recover, billions of dollars have been lost. With this in mind, it is worth exploring cryptocurrency’s potential drawbacks, potentially offering clues for why it collapsed in the first place.