Sell! —

Bitcoin loses 21 percent of its value in broad cryptocurrency rout

Falling cryptocurrency prices reflect a global selloff of risky assets.

Timothy B. Lee - Mar 12, 2020 3:42 pm UTC

Enlarge / El Salvador now says both US dollars and bitcoin are legal tender.
Thomas Trutschel / Getty Images News

The cryptocurrency world has experienced its biggest one-day plunge in months. Bitcoin, the most popular cryptocurrency, is down 21 percent over the last 24 hours. Earlier today, Bitcoin fell below $6,000 for the first time since May 2019.

Ether, the currency of the Ethereum network, is down a whopping 27 percent. Lesser-known cryptocurrencies have seen similarly large losses.

There's no obvious cryptocurrency-specific reason for the crash. Instead, it seems to be part of the broader coronavirus-related selloff that has rocked stock markets around the world.

Promoted Comments

Timothy B. Lee Senior tech policy reporter
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Coppercloud wrote:
show nested quotes
Congress and the White House have considered measures like paid sick leave, a payroll tax holiday, or just sending out checks to every American, but progress on these measures has been slow.

One of these is not like the others. And the others are IMO stupid. You cant cut taxes enough, or write big enough checks to everyone to mitigate this. Most people don't have much money to spare and they're just going to put extra cash to paying off some debts or maybe buying something nice. But that's not helpful. That is not the solution.

Helping with paid time-off will encourage people to ACTUALLY STAY HOME WHEN THEY'RE SICK. Which aside from washing hands is the single most helpful thing we can do across the board here. If you're sick, stay home. Say it with me: If you're sick, stay home.

But there's a lot of people who can't afford that, and just cutting checks to everyone isn't going to change this.

The point of giving everyone money is to prevent a recession. Recessions usually happen when some big negative event (major terrorist attack, big housing market decline, pandemic) causes everyone to get nervous about their household finances and increase their savings rates.

Increasing savings is mathematically equivalent to cutting spending. So if everyone does that at once, then every business will see its revenue fall. If this revenue fall is severe enough, they'll be forced to lay off workers. The laid off workers will obviously have to cut back their spending even more. Other workers, seeing waves of layoffs, get even more panicked and cut back their spending even more. Businesses lose more revenue and have to do even more layoffs. This kind of vicious cycle is how recessions happen.

Putting more money directly into everyone's pockets—either through a tax cut or a direct cash payment—is a way of offsetting this process, or at least slowing it down. The money helps a lot of people get through tough economic times, but more importantly it helps to make sure that spending doesn't collapse and businesses aren't forced to lay off workers.

A an economy-wide recession would be way more damaging to the livelihoods of American workers than coronavirus-specific job losses in restaurants, hotels, airlines, etc. We should also look for ways to help those specific workers, but they are a tiny fraction of the workers who will be hurt if 2020 turns out to be another 2008. And based on the recent moves of the stock and bond markets, a lot of investors think another 2008 is a real possibility.

1418 posts | registered 1/6/2007

Promoted Comments

Timothy B. Lee Senior tech policy reporter
jump to post
Coppercloud wrote:
show nested quotes
Congress and the White House have considered measures like paid sick leave, a payroll tax holiday, or just sending out checks to every American, but progress on these measures has been slow.

One of these is not like the others. And the others are IMO stupid. You cant cut taxes enough, or write big enough checks to everyone to mitigate this. Most people don't have much money to spare and they're just going to put extra cash to paying off some debts or maybe buying something nice. But that's not helpful. That is not the solution.

Helping with paid time-off will encourage people to ACTUALLY STAY HOME WHEN THEY'RE SICK. Which aside from washing hands is the single most helpful thing we can do across the board here. If you're sick, stay home. Say it with me: If you're sick, stay home.

But there's a lot of people who can't afford that, and just cutting checks to everyone isn't going to change this.

The point of giving everyone money is to prevent a recession. Recessions usually happen when some big negative event (major terrorist attack, big housing market decline, pandemic) causes everyone to get nervous about their household finances and increase their savings rates.

Increasing savings is mathematically equivalent to cutting spending. So if everyone does that at once, then every business will see its revenue fall. If this revenue fall is severe enough, they'll be forced to lay off workers. The laid off workers will obviously have to cut back their spending even more. Other workers, seeing waves of layoffs, get even more panicked and cut back their spending even more. Businesses lose more revenue and have to do even more layoffs. This kind of vicious cycle is how recessions happen.

Putting more money directly into everyone's pockets—either through a tax cut or a direct cash payment—is a way of offsetting this process, or at least slowing it down. The money helps a lot of people get through tough economic times, but more importantly it helps to make sure that spending doesn't collapse and businesses aren't forced to lay off workers.

A an economy-wide recession would be way more damaging to the livelihoods of American workers than coronavirus-specific job losses in restaurants, hotels, airlines, etc. We should also look for ways to help those specific workers, but they are a tiny fraction of the workers who will be hurt if 2020 turns out to be another 2008. And based on the recent moves of the stock and bond markets, a lot of investors think another 2008 is a real possibility.

1418 posts | registered 1/6/2007

Timothy B. Lee Timothy is a senior reporter covering tech policy and the future of transportation. He lives in Washington DC.

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