There Are Too Many Cryptocurrencies, and Investors Are Paying the Price
The new world of ‘shit coins’ is fertile ground for pump-and-dump schemes
Last Wednesday was a rough day for cryptocurrency investors. Cryptocurrencies fell across the board, losing more than $500 billion in value at one point, with Bitcoin plummeting more than 20%. And while the market stabilized near the end of the day and bounced back some over the next couple of days, Bitcoin is still down almost 35% over the past two weeks, with other cryptocurrencies tumbling even more. Dogecoin, most notably, is down 55% since May 8th (that dark day when Elon Musk appeared on Saturday Night Live and joked — or rather, said accurately — that dogecoin was a “hustle”).
This precipitous decline in value in such a short period of time of course underscores why cryptocurrencies are so ill-suited to being actual currencies: no one is going to regularly exchange goods and services for a currency whose value can plummet 25% in a single day simply because Elon Musk said something. But that’s unimportant to most cryptocurrency investors, who see Bitcoin, et.al., not as currencies, but as speculative assets, and also see this kind of massive volatility as par for the course. Painful as these sell-offs are while you’re in the middle of them, they’re relatively easy to shake off for most crypto enthusiasts, who dismiss them as a mere blip.
That’s an understandable response, given that if you look at the history of Bitcoin specifically, you’ll see more than a few massive sell-offs, none of which ended up stopping Bitcoin from rising ever upward. And yet those sell-offs occurred in a very different investing environment for crypto, one where there were few alternatives to Bitcoin, and where cryptocurrencies were, in that sense, scarce. That’s no longer true. The most striking development in crypto in recent months is the relatively sudden, and unprecedented, explosion in the sheer number of cryptocurrencies that are being seriously traded, an explosion that has the potential to cast doubt on the long-term value of cryptocurrencies as a whole.
There are now more than 75 cryptocurrencies that are worth more than a billion dollars. And while most were created a while ago, it’s only relatively recently that…