Cryptocurrency: Economic Impact

By Abigail Cormier, Trending Writer

After the initial Bitcoin surge in price last year, the market has been flooded with cryptocurrencies. The question on every investor’s mind is how to view various cryptocurrencies. It has been a highly divisive issue among billionaires and everyday Americans alike.

Warren Buffet repeatedly attested to media that Berkshire Hathaway would continue to avoid cryptocurrencies. Rather, the firm “remained focused on identifying good businesses and investing in them.”

Bill Gates concurred with fellow billionaire Buffet on the riskiness of Bitcoin and other cryptocurrencies. Additionally, he attested to the ability for the anonymous nature of cryptocurrency to allow for various illicit activities. These comments occurred during an “Ask Me Anything” session on Reddit.

Billionaire Mark Cuban takes a different perspective. He owns cryptocurrency, but spoke out about the dangers of investing in it as it is still a high-risk investment. Cuban recommended that investors at any level only invest the amount that they are willing and able to lose entirely.

These various billionaires have one common agreement on cryptocurrency—it is not the same safety level as investing in companies such as Apple. This makes it a worthy high-risk investment option. As Cuban puts it, if you have the money to lose, it might be worth taking the gamble on cryptocurrency.

However, there is a great deal that is still highly unknown about cryptocurrency, part of what is making the volatility so high in the cryptocurrency markets. Many experts reference Blockchain technology and that the value of these currencies is in part tied to the technology underlying it. Once the value of this technology is better understood and has a standard value to it, many investors believe the volatility may drop.

As far as lasting as an investment option, there is no current consensus among many investors in the industry. If Blockchain technology could be effectively valued and utilized in a tangible, profitable way, cryptocurrencies may decrease in volatility. Lowered volatility is a requisite for many investors to consider it safe to hold Bitcoin and others as a long-term asset.

Without a decrease in volatility and Blockchain technology becoming utilized in a measurable way, cryptocurrency will continue to be a highly volatile and high-risk investment. Currently, it is largely viewed as a bubble, similar to the tech bubble in the 90s or housing in the 00s. In large part, because investors are speculating on what this underlying Blockchain technology may be worth. This may prevent cryptocurrency from remaining an investment option in the future. Currently, it remains an investment option—albeit a risky one.

 

A version of this article appeared in the Tuesday, March 20th print edition.

Contact Abigail at

abigail.cormier@student.shu.edu

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