EDITOR NOTE: Everyone with common sense knew that cryptocurrency volatility made for a poor “store of value,” especially for currencies that are hardly used as currency at all. Most people understood that any form of “money” subject to the whims of “personality risk,” such as Elon Musk, wasn’t a very stable form of money, to begin with. That’s why crypto investors allocate a very small portion of their portfolios to crypto speculation, right? Wrong. Unfortunately, many people had a hard time distinguishing a gamble from an investment, monetary soundness from speculative material in the recent Coinbase outage. Coinbase didn’t realize it either, as the exchange wasn’t able to anticipate the kind of “network congestion” that a crash could bring; similar to how many new investors in the crypto space didn’t realize the kind of plunge that volatility can produce. Analysts believe that investors may find the current discounted levels to be favorable for more purchases. But why lose fake (fiat) money investing in more fake money?
Now isn't the greatest time to be a cryptocurrency trader. Coinbase suffered an hours-long outage this morning (May 19th) that hindered transactions on the exchange. The company had pinpointed the main issue and was rolling out a fix as of this writing, but it also noted a separate problem with delayed Etherium and ERC-20 withdrawals due to "network congestion."
The outages came right as crypto traders continued a massive selloff initially prompted by Elon Musk suspending the use of Bitcoin. Yahoo Finance noted that multiple currencies dropped by large volumes on the morning of the 19th, with Bitcoin dropping about 22 percent, Etherium falling 30 percent and the Musk-supported Dogecoin plunging 32 percent. China's ongoing crackdown against non-official cryptocurrencies was also believed to play a role.
It won't be surprising if the currencies recover. However, the selloff is a reminder that cryptocurrencies are still very volatile compared to conventional investments — it doesn't take much to erode a significant amount of value, even if many are comfortable with digital currency at this stage.
Originally posted on Engadget