Why crypto’s bruising comedown matters
It has prompted flight from some stablecoins into others
It has been a vicious year for financial markets, and more punishing still for crypto assets. The market capitalisation of crypto has slumped to just $1.3trn, from nearly $3trn in November. On May 18th bitcoin traded at around $29,000, a mere 40% of its all-time high in November; the price of ether, another cryptocurrency, has collapsed just as spectacularly. Six months ago Coinbase, an exchange and the leading crypto-industry stock, was worth $79bn. Now it is valued at just $14bn, and the firm is “reassessing its headcount needs”.
The sell-off comes as the Federal Reserve begins raising interest rates. Tech stocks, high-yield bonds and other risky assets have also swooned. But crypto’s bruising comedown is interesting for a deeper reason: it has exposed weaknesses in the plumbing of the system.
This article appeared in the Finance & economics section of the print edition under the headline “Unstablecoin”
Finance & economics May 21st 2022
- Global growth is slowing, but not stopping—yet
- Even China’s official economic figures look bleak
- A baby-formula shortage feeds criticism of corporate heft and price gouging
- Why crypto’s bruising comedown matters
- Offset markets struggle in the face of surging commodity prices
- Is China “uninvestible”?
- India’s once-vaunted statistical infrastructure is crumbling
- How to unleash more investment in intangible assets
From the May 21st 2022 edition
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