Cryptocurrency Slide Shows Intense Volatility and Skittishness of Investors, U of R Economist Says

Article ID: 688929

Released: 2-Feb-2018 4:45 PM EST

Source Newsroom: University of Redlands

Expert Pitch
  • Dr. Nathaniel Cline, economist, University of Redlands

Dr. Nathaniel Cline is a recognized expert in U.S. and international economics and finance who is available to comment on the economic impact of the current crypto-currency volatility.

“Bitcoin is best thought of as a speculative asset rather than a true currency. It can’t serve as a functional currency because it doesn’t have the backing of central government who collects taxes in Bitcoin, and a central bank that acts as a lender of last resort. And in many ways, Bitcoin is a purely speculative asset. That is, it doesn’t have a “fundamental” anchor to it (like, say, a price-to-earnings ratio for stocks).

“Does this current slide represent a crash in the crypto market? That’s tough to say. Speculative price increases can continue as long as market participants remain optimistic, or believe there is a “greater fool” that they can sell their assets to. Predicting crashes in speculative markets is a notoriously difficult game. What this slide does confirm is the intense volatility of Bitcoin and the skittishness of investors at the slightest indication of regulation. Both are good indicators of speculative market dynamics.

“Could a crypto crash have a significant impact on the overall economy? This seems highly unlikely. The number of participants is small. And the way in which financial market developments affect the real economy is through changes in actual spending. It is by no means clear that crypto-currency markets bear any relationship with actual spending on goods and services economy-wide.”

Dr. Cline holds a Ph.D., and master's degree in economics from the University of Utah, and a bachelor's degree in economics from Earlham College. 



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