Cryptocurrencies have experienced wild price swings over the past several years. Last November, their market capitalization skyrocketed to over $2.9 trillion before dropping within weeks to less than $870 billion–still an amazing figure when you consider that virtual objects such as computer code don’t even exist! Crypto markets have been volatile due to several factors ranging from approval of spot Bitcoin ETFs and an impending “Bitcoin Halving”, which will reduce new coinage from entering circulation.
Cryptocurrencies continue to be highly volatile assets that attract a growing number of investors, yet any attempt at investing in them may lead to huge returns; it is therefore crucial for prospective buyers to fully comprehend what drives their value and how different investments differ in this respect.
Cryptocurrencies differ significantly from traditional investments because their primary goal is freedom from government influence and control, an aspect which has contributed to their immense popularity while creating significant risk for those unprepared to withstand such losses.
Cryptos were originally designed as payments systems that use decentralized networks of users to transmit value (akin to money), but because they’re unregulated banking regulations can make cryptos a target for criminals and terrorists looking to bypass sanctions. Recently cybercriminals have increasingly utilized ransomware attacks against computers that they infiltrate before demanding payment via cryptocurrency in order to restore them; drug cartels and smugglers also utilize cryptos as means to purchase illicit goods.
Furthermore, crypto’s extreme volatility can have ripple effects across global equity markets. According to research findings, Tether movements correlate closely with those of global stock markets and account for up to 7 percent of their variance.
Cryptocurrencies will depend heavily on regulatory agencies and politicians as well as consumer adoption of digital assets like bitcoin. Faster action from these stakeholders may enable cryptos to fulfill their promise as hedges against inflation.
GAZETTE spoke with Harvard Business School Professor Scott Duke Kominers to explore how cryptocurrency prices could potentially hinder future development, and what regulatory measures might be put in place to safeguard investors.
GAZETTE, IBD’s daily investing newsletter, originally ran this article on March 20, 2024. If you want the latest investing news delivered right to your inbox, sign up today – don’t forget Facebook, Twitter and Instagram too if you have questions! Reach out to our editorial team with any inquiries; they would love to hear from you. Please note we do not provide tax or investment advice – for this matter it is always wise to consult a qualified professional regarding your own specific circumstances before making decisions based on information provided herein by IBD Media LLC 2024 All rights are reserved by IBD Media LLC 2024 All rights are reserved by IBD Media LLC all rights are reserved by IBD Media LLC all rights are reserved by IBD Media LLC all rights are reserved by IBD Media LLC all rights are reserved by IBD Media LLC 2024 All rights are reserved by IBD Media LLC all rights are reserved by IBD Media LLC, all rights may not be published, broadcast rewritten or redistributed without prior express written permission by IBD Media LLC 2024 all rights for publication broadcast or redistribution are strictly reserved by 2024 IBD Media LLC All rights are reserved by 2024 IBD Media LLC all rights may not be reproduced or redistributed without prior express written authorization by 2024 IBD Media LLC All rights may not be published broadcaste or redistributed without referenced to IBD Media LLC and all rights Reserved 2024 and All rights may not be copied/ redistributed or redistributed without prior express written approval/ rewritten/red/redistributed 2024 IBD Media LLC/or redistributed 2024 for 2025 etc etc, any copying 2024 IBD Media LLC and all rights Reserved or red distributed and or copied for 2024 IBD Media LLC all or red rewritten/ red re re or red reclaimed/ or red distributed without valid permission and All or red/red or red distributed without original source 2025/all rights being retained or copied 2024 will/re/ or red distributed without written/ rede this material may not credited or red distributed before 2024 All rights re or red distributed or red distributed or copied/ by 2024 Media LLC with full re/ red/or for 2025/ re/ all/ all or red re/ etc and All re. all / or red any kind without/ in 2025// 2025 All/ All// I// before 2024/ or red distribution to I/ before by 2020 I/or by/or or copied etc unless express rewritten/ red or red (all/ etc etc for publication/ or red/ any given due respect with regards re/ red recast etc by which made available/ red/ etc etc, all/ by means re/