By Joseph T. Salerno*
It looks like we have an asset bust for the record books in the making. The cryptocurrency crash now under way today surpassed the dot-com bust that occurred at the beginning of the millennium,. While the NASDAQ Composite Index suffered a decline of 78% from its peak in March 2000 to its trough in October 2002, the MVIS CryptoCompare Digital Assets 10 Index, has tumbled 80% from January of this year to today. During this period, the price of bitcoin, which represents 55% of the value of all cryptocurrencies, has plunged from around $19,300 at its January peak to $$6,300 as I write this. In the estimate of one commentator, the only “currency” in the world that is now faring worse than bitcoin is the Venezualan bolivar.
Whether or not cryptocurrncies recover–and I doubt they will–it is clear that their volatility make them unfit to serve as a general medium of exchange. However this lesson will likely be lost on the promoters of cryptocurrency. As Tyler Winklevoss put it:
As you get older your brain loses its plasticity at some point and you get wedded to the frameworks that you have.
By the way, Mr. Winklevoss, one of the Winklevoss twins of Facebook lore and one of the first self-proclaimed bitcoin billionaires, was speaking about the critics of cryptocurrency.
About the author:
*Joseph T. Salerno received his Ph.D. in economics from Rutgers University. He is professor emeritus of economics in the Finance and Graduate Economics Department in the Lubin School of Business of Pace University in New York City. He is the editor of the Quarterly Journal of Austrian Economics and the Academic Vice President of the Ludwig von Mises Institute where he held the inaugural Peterson-Luddy Chair in Austrian Economics. He also holds the John V. Denson II Endowed Professorship in the economics department at Auburn University.
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