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Jacobin - May 18, 2022

After a year of exuberance, the crypto winter is here, and it’s not clear there will ever be a spring. The promises that coin values would go “to the moon” have given way to a rapid decline, while the slang term “wagmi” — “we’re all going to make it” — seems like a cruel joke. Enthusiasts used to chide critics by telling them to “stay poor,” but now that’s the situation of many of the people who put their money into the digital assets based on the lies of those with much less to lose.

The values of major cryptocurrencies have been sliding for months, but the crash entered a new phase last week. TerraUSD (or UST) was the third largest stablecoin on the crypto market, while Luna was the fourth most valuable cryptocurrency by market valuation. But now both are virtually worthless — and a lot of people have lost a lot of money.

Posting on the r/terraluna subreddit, one user wrote, “I lost all my life savings.” Another said the same, declaring “I’m out of crypto.” Others posted about the tens and even hundreds of thousands of dollars they’d lost, and how it would mean they wouldn’t be able to buy a house — or could lose their homes altogether. Eventually, moderators restricted new posts and pinned international suicide hotlines to the top of the page as people with huge losses said they saw it as their only way out.

After a year of exuberance, the crypto winter is here, and it’s not clear there will ever be a spring. The promises that coin values would go “to the moon” have given way to a rapid decline, while the slang term “wagmi” — “we’re all going to make it” — seems like a cruel joke. Enthusiasts used to chide critics by telling them to “stay poor,” but now that’s the situation of many of the people who put their money into the digital assets based on the lies of those with much less to lose.

Boom and Bust

Crypto values started to rise at the end of 2020, kicking off a mutual reinforcing cycle that kept the line going up. Venture capitalists flooded money into the space, tech workers took jobs at crypto start-ups, and the media was happy to report on all the money changing hands. The headlines about the high returns that a select number of people were making and the conviction of many supporters that crypto could only appreciate convinced a lot of people to risk their money on highly volatile assets.

As usual with the tech industry, cryptocurrencies couldn’t just be sold as a risky investment; they had to be framed as a form of social good. Spike Lee starred in an ad promising crypto would empower marginalized groups, some internet advocacy organizations asserted it was the path to decentralization, and a whole range of groups deployed exploitative blockchain projects in the Global South claiming they would help locals. It wasn’t hard to see that there was nothing to these claims, but many people wanted to believe in the benevolent power of technology.

In November 2021, just weeks after Matt Damon appeared in an ad enticing people to buy into crypto with the slogan “fortune favors the brave,” the values of cryptocurrencies and related products like NFTs started to tank. Bitcoin and Ethereum, the two largest cryptocurrencies, hit respective peaks of around $69,000 and $4,900 that month, but had lost half their value by January. Over that same period, average NFT prices fell by 48 percent, while trading volumes on OpenSea, the biggest NFT marketplace, plummeted by 80 percent. ...
Read the full report at Jacobin