The widespread crypto crash has been all over the mainstream media of late. Millions of people own cryptocurrencies, and the fall of crypto values has been steep.
How Bad Is The Crypto Crash?
Imagine a plane that loses an engine and crashes uncontrollably out of the sky. That's what the price of most cryptocurrencies has looked like over the last year.
Cryptocurrencies took a big hit recently due to the collapse of the FTX crypto exchange. FTX was once so big that its founder was one of the world's ten youngest billionaires. It has now imploded into bankruptcy in a dramatic destruction of investor wealth.
There is no way to be sure what will happen in the future with crypto values. One challenge, in particular, is that crypto is a relatively new investment vehicle.
The crypto market formed just a little over ten years ago. Its short history offers little guidance as to whether it may recover from a crash of this kind. While Bitcoin has seen nosedives in value before, some economists see this crash as fundamentally different from anything else that has come before it.
Crypto prices in recent years mirrored the signs of a market bubble. In some ways, it resembled the Dutch tulip bulb market bubble that occurred back in the mid-1600s, where speculation drove the value of tulips to extremes.
In that case, some tulip bulbs sold for six times the average person's annual salary. Looking back, it seems shocking that anyone would have paid that amount to buy a single tulip.
There is a magnet pulling the stock market up over time. There are occasional periods of distress, but historically the imaginary magnet has always prevailed and pulled the prices back up.