I don't buy it it all. The lowest point of this structure is presently several hundred meters above sea level. There is almost no archeological trace of human habitation, save for some ancient stone tools (no trace of structures, no middens indicating dense population.) These tools date to the Late Pleistocene to early Holocene, when sea levels were even lower than they are today (in other words, this formation was even further from the sea then.)
I did hear a fairly credible theory that it is just an allegory invented by Plato, but influenced by various other myths and political centers (such as king Minos rule on Crete).
Another quite compelling theory posits the destruction of Thera also caused the Biblical ten plagues of Egypt.