Cryptocurrency has been getting a bad name for good reasons lately.
The value of Bitcoin, the public market front for the largely unregulated cryptocurrency industry, has lost two-thirds of its value over the past year, compared to 25% for the S&P 500. However, the most popular bitcoin has been a better investment over five years.
The Federal Trade Commission just stated that cryptocurrency, despite being a predominant payment method, is “an alarmingly common way for scammers to get people’s money. Since the beginning of 2021, more than 46,000 people have reported losing more than $1 billion in cryptocurrency due to Scams; one in four dollars lost is reported, more than anything else other payment method.”
There is no central regulator to report suspicious transactions and no way to reverse the transaction. Most of them do not understand encryption and are easy prey for online scammers.
From Super Bowl ads to Hollywood celebrities, we’re swamped with ballparks. Kim Kardashian recently paid $1.26 million in fines and inconvenience for promoting crypto-asset security without revealing that she was paid $250,000 for an Instagram post about EMAX tokens, a cryptocurrency.
SEC Chairman Gary Gensler called the cryptocurrency market the “Wild West.”
The Financial Stability Oversight Board, in a report issued this month at the behest of Treasury Secretary Janet Yellen, concluded that “crypto-asset activities could pose risks to the stability of the US financial system” if their interrelationships with the traditional financial system and their scale persist. Grow “without being bound by … proper regulations,”
The board found that “many crypto-asset activities lack basic risk controls to guard against operational risk or to help ensure that leverage is not excessive.” “It appears that the price of crypto assets is primarily driven by speculation.”
Yellen and Warren Buffett, America’s two biggest long-term investors, as well as JPMorgan Chase CEO Jamie Dimon and others, have raised concerns.
“Who am I to argue with Warren Buffett?” said Mark McIntosh, a professor of finance at the University of Augsburg and a former Wall Street investment banker. dollar alternative.
But he said it may have potential when investors need a “potential store of value” like gold to withstand extreme economic events.
“Can crypto act as a hedge against negative moves in the stock market?” Macintosh said.
The board recommended rule-making authority for federal financial regulators, legislation regarding the risks posed by “stable coins,” whose value is linked to currency, commodities or other financial instruments, and further study of the industry.
“Crypto hasn’t changed since the Great Recession of 2008 and the cyber bad guys who started it because they didn’t trust traditional financial institutions,” said Vivian Fang, a professor at the University of Minnesota Carlson School of Management. “Bitcoin is high risk. It is volatile and does not generate cash flow. But there has been increased adoption, including Google, which intends to use Coinbase to process crypto payments, as well as investors.”
The price of Bitcoin has risen about 240% to 40% for the S&P 500 over five years.
Correlation in the movement of cryptocurrency prices [and stocks] Since March 2020, Fang said, “There was a jump. Before 2020 it was close to zero. We injected a lot of liquidity into the economy. That told investors it was okay to trade risky assets, including high-growth stocks. They shot All of them. They are now descending in parallel movements. If the stock market goes down, the cryptocurrency will go down.”
There are other repercussions, including significant environmental downsides.
Cryptocurrency fainting Compute North . has recently gone bankruptEden Prairie, a cryptocurrency “miner”. Compute North raised $385 million in capital this year, boasts $500 million in assets and owns data centers in Nebraska, Texas and South Dakota.
Cryptocurrency miners are controversial because they take huge amounts of energy to produce cryptocurrency, an electronic asset based on mathematical calculations whose primary purpose so far appears to be speculation.
A new crypto-mining operation in Jamestown, ND will use twice as much energy as the entire city of 16,000. The Jamestown operation was immediately ranked as Otter Tail Power Co.’s second largest customer.
and there Related repercussions between neighbors From noisy mines that absorb energy.
“I think it’s risky but there is value,” Fang added. “Most crypto stocks do not generate cash flow and their value is difficult to calculate. This attracts speculators.” [regulators] They quarrel over what to do with President Biden [ordered] Regulators to develop a framework for regulating digital assets. This is not a sign of a moribund industry.”