Most of the recent press about cryptocurrencies in the last month has been focused on the crash: why it happened, what will happen next, and the growing list of skeptics. One place to start catching up on what has been going on would be the May 21 EconExtra. The two articles covered in this post share the same perspective: cryptocurrency is a solution in search of a problem.

This NYT article looks at the hype in the crypto industry that made some big winners, and others big losers, when stablecoin Terra crashed in May. By the time the dust settled, $1 Trillion of value was lost.

Here are three more articles in which experts provide their perspective on the crypto crash.

Morning Brew interviewed Alkesh Shah, the global head of crypto and digital assets for Bank of America, to get his view on the crash and what happens now. He views what happened in May as a market correction, not a meltdown. The key reason behind his support for the industry is his belief that the change brought to the industry by Ethereum will be the key to its future value and success. Basically, he is talking about all the operating systems that are being developed based on blockchain. His view is that it is these blockchain applications (Web3) that are valuable, not the currencies based on blockchain.

Institutional Investor compared the crypto crash to Lehman Brothers. There is good detail on the Terra implosion in this article. My take on this article is that the future value of blockchain applications and currencies lies heavily on broad acceptance of them. But by nature, they are complicated and opaque, limiting the number of people who can truly understand them, which may limit broad acceptance.

This Washington Post (subscription may be required) looks at the criticism coming from Molly White, a software engineer by training and Wikipedia editor who has now turned her sites on crypto and is gaining traction, particularly since the events in May unfolded. As made clear in the previous article, few people truly understand crypto, and Ms. White’s number one issue with cryptocurrency players is that they capitalize on that fact. Major players market the coins to the masses as an investment that unquestionably should be in every portfolio. (Ms. White IS someone who understands it quite well, and advises people on the subject.)

"The debate over who crypto serves and who will ultimately win is far from over. White’s voice is rising, but the money and power plowing into crypto is, too."

 There were a couple of interesting articles worth mentioning because they pick up on other aspects of this “industry.”

The first article from MarketWatch is a report from the Federal Trade Commission that consumers have reported losing over $1 billion to scammers since last year.

• There were 46,000 reports filed
• The median loss was $2600
• The 2021 level was sixty times the amount of fraud in just 2018
• The bait for these scams was almost entirely from a social media post with the promise of a large financial return

Because the market is unregulated, no one is monitoring activity for and flagging anything that looks suspicious. By design, it is anonymous, and transactions can’t be reversed. Is this just something that one should expect in an unregulated environment, and “buyer beware?” Or can the case be made for regulation.

Cryptocurrency was a headline topic at the annual World Economic Forum at Davos this year. This CNBC article covered the main point of the discussions.

• The conference occurred just after the crash, and industry leaders expressed hope that a crash would eliminate bad actors from the business.
• Industry experts do not believe there is no need for numerous cryptocurrencies, and hope the crash reduces the reckless and irrational behavior.
• Stablecoin experts drove home the distinction between algorithmic stable coins (like Terra, which collapsed), and those backed by assets.
• Discussion of potential regulation seems to be taking on a slightly different tone than in the past, becoming more constructive than punitive.

On a related note, if you want to talk about NFTs, this article from the Washington Post (subscription may be required) discusses how people who shelled out big money for digital art may now be questioning these investments. And this Slate article lists how many Bored Ape NFTs have been hacked/stolen.

About the Author

Beth Tallman

Beth Tallman entered the working world armed with an MBA in finance and thoroughly enjoyed her first career working in manufacturing and telecommunications, including a stint overseas. She took advantage of an involuntary separation to try teaching high school math, something she had always dreamed of doing. When fate stepped in once again, Beth jumped on the opportunity to combine her passion for numbers, money, and education to develop curriculum and teach personal finance at Oberlin College. Beth now spends her time writing on personal finance and financial education, conducts student workshops, and develops finance curricula and educational content. She is also the Treasurer of Ohio Jump$tart Coalition for Personal Financial Literacy.