Bitcoin fell to a three-month low recently and its movement has closely mirrored the decline in financial markets.
Bitcoin bulls often portray it as an asset uncorrelated to traditional financial markets, CNBC reported, but experts have noticed growing parallels in the price movements of bitcoin and stocks.
It also comes from the fact that Dogecoin co-founder Jackson Palmer wrote a long essay on Twitter on cryptocurrency preying on the most vulnerable.
“Even the most modest criticism of cryptocurrency these days will attract vilification from the powerful figures who control the industry,” he wrote, “and the ire of retail investors to whom they sold the bogus promise to one day be another billionaire.”
Q: Is the allure of cryptocurrency fading?
Ray Major, SANDAG
NO: The allure of crypto remains, but recent market swings reinforce the reality that crypto is highly speculative. Much of its value is based on a general “gaming mentality” rather than sound investment principles. Many people invest in crypto like lottery tickets, hoping for a big win without understanding or caring what determines the price. Crypto is here to stay. Some of the appeal will fade as it matures, but for now, stay tuned for a wild ride.
Lynn Reaser, Point Loma Nazarene University
YES: As the Federal Reserve begins to tighten monetary policy, riskier assets will look much less attractive. Cryptocurrencies clearly fall into this category. Their volatility diminishes their use as a stable store of value or medium of exchange. Their secrecy continues to foster illegal activities. Environmental concerns have also increased over their intensive electricity consumption. Central banks have pushed back and are likely to switch to stablecoins, backed by national currencies, or their own digital currencies.
Reginald Jones, Jacobs Center for Neighborhood Innovation
NO: Cryptocurrencies continue to grow as an emerging currency. There are now thousands of cryptos in the asset class. Although they are still far from being used as mainstream payment sources, in the last year more and more American businesses have accepted cryptocurrencies like bitcoin. A trend likely to increase. The prediction is that more countries will follow in accepting the currency as legal tender. All of this is not to say that the cryptocurrency will escape the upside – perhaps even the leading – market position that we have seen.
Kelly Cunningham, San Diego Institute for Economic Research
NO: the the government printing money at an astonishing rate in response to lockdowns and associated economic disruptions is causing significant inflation, which makes virtual currencies even more attractive. Cryptocurrencies are designed to create financial sovereignty for all and have as much of a future as the internet itself. Cryptocurrencies could displace central banks, conventional banks and challenge national monetary monopolies. Virtual currencies provide their own units of account and payment systems, which allow peer-to-peer transactions without central clearinghouses and without a central bank.
Phil Blair, Manpower
YES: I liken it to the public perception of a Ponzi scheme. Too good to be true. And with trusted financial advisors who don’t push crypto products and generally say buy at your own risk, the product will never go mainstream. It seems like such a desperate decision for people with limited resources to take hard-earned dollars and roll the dice to see if the product, for unknown reasons, will skyrocket or crash daily.
Gary London, London Moeder Advisors
YES: As an investable commodity, it smells like tulips. While it will have a permanent place in the global currency, its appeal as an investment vehicle with unlimited upside potential is set to fade. Early investors often won big. Its promise is in its basic premise to decouple money from banks or government, making it a highly fungible global currency.
Alan Gin, University of San Diego
Do not participate this week.
James Hamilton, UC San Diego
YES: There is a market value for cryptocurrency. But as an asset class, it’s something the vast majority of investors should avoid. Bitcoin’s value is far too unstable for it or other cryptos to replace traditional currency as a logical way to store wealth or pay for transactions. Far too many people were jumping on the bandwagon in the mistaken belief that everything that had gone up in value would continue to do so.
Austin Neudecker, Weave Growth
NO: Cryptocurrency represents a change in the way value is created and transferred. Basically, cryptocurrency is built on an underlying protocol called blockchain, which allows people to transfer digital ownership of anything without the need for an intermediary. Regardless of the success or failure of a specific digital currency, their existence is not a fad. This technology will change the way transactions work, and even business models.
Chris Van Gorder, Scripps Health
YES: Cryptocurrency has received unwanted attention from regulators and tax authorities as they recognize that a small but growing number of transactions are used for illegal purposes, such as money laundering, evasion tax, fraud and outright theft. According to Chainalysis, illicit transactions totaled $14 billion in 2021, up 79% from $7.8 billion the previous year. The threat of increased government scrutiny and potential fraud may have diminished the attractiveness of trading and investing in cryptocurrencies.
Norm Miller, University of San Diego
NO: With people like Matt Damon pushes Crypto on every channel with lines like “Fortune Favors the Brave” and Crytpo.com now sponsoring sports arenas, it’s nowhere ready to fade, though no one knows how to estimate the underlying value. Crypto “investors” say supply is limited, but it is easy to start new cryptos and hope they will spread like Dogecoin or Polkadot (no joke). Coinbase claims 68 million verified users and 6,000 different cryptocurrencies, with new ones starting every week.
Bob Rauch, RA Rauch & Associates
Do not participate this week.
Jamie Moraga, IntelliSolutions
NO: Cryptocurrency is a risky business due to its volatility. Investors who care strictly about price may be discouraged as prices are down from 2021 highs, but have still risen year over year. Other metrics, including developer activity, seed funding, and active users, indicate sustained and continued interest. Non-Fungible Tokens (NFTs) are an emerging cryptographic technology gaining popularity where unique digital assets (art, music, images, videos) that are difficult to replicate are sold to fans via blockchain services. Cryptocurrency is evolving, not fading.
David Ely, San Diego State University
NO: The prices and trading activity of cryptocurrencies, like other speculative assets, react to changes in interest rates, forecasts of future economic conditions, and uncertainty. Investor sentiment towards cryptocurrencies will fluctuate over time, leading to changes in the volume of entries into these markets. However, overall investor interest remains strong. Derivatives now offer additional ways to gain exposure to cryptocurrencies. Cryptocurrency regulations enacted in the future could have the biggest impact on the pace of expansion.
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