Cryptocurrencies and the closely related NFT market are in trouble - and there is concern the 'crypto crash' could impact the wider economy.
Bernard Hickey, editor of the Kākā newsletter, told Q+A on Sunday that this week’s drop in some cryptocurrencies' worth was “gut-wrenching for those people who have their money in some sort of crypto asset”.
“This week we saw the breaking of the back of one of the ‘stable coins’, now it wasn’t the biggest one but to actually see something that was supposed to be locked in step with the US dollar completely disintegrate really surprised a lot of people.
“This has really thrown the whole industry back by about a trillion dollars in value.”
Business commentator Rebecca Stevenson agreed that “it’s been really devastating for a lot of crypto investors.”
“For every person that has done well and has dined out over the last few years with crypto, because it has been doing extremely well, there are also just average regular investors and their tales of devastation and the financial pain that they’re going through is actually really quite touching and affecting.”
And there are concerns that if the ‘stable coins’ which are backed by real assets were to face too much pressure, “you could see the crypto crash leak into the real world, the real markets”, said Hickey.
When asked how a complete crash of Bitcoin and other cryptocurrencies would affect the wider economy, Stevenson said: “When we have that situation where now we have real concerns about this unregulated asset sort of tipping over and affecting other things that we do have control over, we’re going to see regulation.
“It has grown like topsy and we are now seeing that it’s become so big that it could potentially affect other asset classes, which is a big concern”.