Is the allure of cryptocurrency fading?

Bitcoin recently fell to a three-month low and its movement accurately mirrored the decline in financial markets.

Bitcoin bulls often describe it as an asset uncorrelated to traditional financial markets, CNBC reported, but experts have noted growing parallels in Bitcoin and stock price movements.

It also comes as Dogecoin co-founder Jackson Palmer wrote a long Twitter essay about cryptocurrency preying on the vulnerable.

“Today, even the most humble criticism of cryptocurrency will smear the powerful who control the industry,” he wrote, “and the wrath of the retail investors whom they sold the false promise of being a billionaire one day. “

We asked a panel of economists and financiers and business people from San Diego the following question:

Q: Is cryptocurrency fascination fading?

Ray Major, SANDAG

NO: Crypto’s appeal remains, but recent market volatility reinforces the reality that crypto is highly speculative. Much of its value is based on a general “gambling mentality” rather than sound investment principles. Many people invest in crypto like lottery tickets hoping for a big payout without understanding or caring what drives the prize. 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

JA: As the Federal Reserve begins to tighten monetary policy, riskier assets will look a lot less attractive. Cryptocurrencies clearly fall into this category. Their volatility reduces their use as a stable store of value or medium of exchange. Their secrecy continues to encourage illegal activities. Environmental concerns have also risen because of their intensive power consumption. Central banks have pushed back and will likely switch to stablecoins backed by national currencies or their own digital currencies.

Reginald Jones, Jacobs Center for Neighborhood Innovation

NO: Cryptocurrencies continue to spread as an emerging currency. There are now thousands of cryptos in the asset class. While still a long way from being used as a mainstream payment source, more US businesses have accepted cryptocurrencies like bitcoin over the past year. Ascending trend. According to forecasts, other countries will follow and accept the currency as legal tender. All of this is not to say that the cryptocurrency will escape the upside-down — perhaps even overwhelming — market position we’ve seen.

Kelly Cunningham, San Diego Institute for Economic Research

NO: The government printing money at an astounding rate in response to lockdowns and the associated economic disruptions is causing significant inflation, making virtual currencies even more attractive. Cryptocurrencies are intended to create financial sovereignty for everyone and have as much future as the internet itself. Cryptocurrencies could displace central banks and conventional banking and challenge national money monopolies. Virtual currencies offer their own units of settlement and payment systems, enabling peer-to-peer transactions without a central clearing house and without a central bank.

Phil Blair, Workers

JA: I liken it to the public perception of a Ponzi scheme. To be too good to be true. And since trusted financial advisors don’t push the crypto products, usually stating that you buy them at your own risk, the product will never go mainstream. It feels like a desperate move for those with limited resources to take hard-earned dollars and roll the dice as to whether the product will go up or down daily for unknown reasons.

Gary London, London Moeder Advisors

JA: As an asset, it smells like tulips. While it will have a permanent place in world currency, its appeal as an investment vehicle with limitless upside potential is bound to fade. The early investors often won big. Its promise lies in its fundamental premise of decoupling money from banks or governments, making it a very fungible world currency.

James Hamilton, University of California, San Diego

YES: There is a market value for cryptocurrency. But as an asset class, the vast majority of investors should avoid it. 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 jumped on the bandwagon under the mistaken belief that whatever has increased in value will continue to do so.

Austin Neudecker, Web Growth

NO: Cryptocurrency represents a shift in the way value is created and transferred. Basically, cryptocurrency is based 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 particular digital currency, its existence is not a fad. This technology will change the way transactions and even business models work.

Chris Van Gorder, Scripps Health

JA: Cryptocurrency has attracted unwanted attention from regulators and tax authorities as they recognize that a small but growing number of transactions are being used for illegal purposes such as money laundering, tax evasion, fraud and outright theft. According to Chainalysis, illicit transactions totaled US$14 billion (RM58 billion) in 2021, up 79% from US$7.8 billion (RM32.65 billion) last year. The threat of increased government scrutiny and potential fraud may have reduced the appeal of cryptocurrency transactions and investments.

Norm Miller, University of San Diego

NO: With the likes of Matt Damon pushing 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 appreciate the underlying value. Crypto “investors” say supply is limited, but it’s easy to launch new cryptos and hope they catch on like Dogecoin or Polkadot (no joke). Coinbase claims 68 million verified users and 6,000 different cryptocurrencies, with new ones being added weekly.

Jamie Moraga, IntelliSolutions

NO: Cryptocurrency is a risky endeavor due to its volatility. Investors who are strictly price conscious might be disheartened as prices are down from 2021 highs, but they are still up year-on-year. Other metrics such as developer activity, startup funding, and active users indicate continued strong interest. Non-fungible tokens (NFTs) are an emerging cryptotechnology that is growing in popularity as unique digital assets (art, music, images, videos) that cannot be easily replicated are sold to fans via blockchain services. Cryptocurrency is evolving, not fading.

David Ely, San Diego State University

NO: Cryptocurrency prices and trading activity, like other speculative assets, react to changes in interest rates, forecasts of future economic conditions and uncertainties. Investor sentiment towards cryptocurrencies will fluctuate over time, leading to changes in the volume of inflows into these markets. However, overall investor interest remains strong. Derivatives now offer additional ways to gain exposure to cryptocurrencies. Cryptocurrency regulations passed in the future could have the biggest impact on the pace of expansion. – The San Diego Union-Tribune/Tribune News Service

source https://www.bisayanews.com/2022/01/23/is-the-allure-of-cryptocurrency-fading/