Questions have been raised regarding the legitimacy and creditworthiness of bitcoin since the days of its eruption. While its proponents believe its the gold of the future, its opponents think quite the opposite. A large part of the usage of cryptocurrencies is linked to illegal activities even now, ten years after its eruption. The market is also highly unregulated owing to which, a lot of negative elements have seeped into this world..
BlockPublisher recently raised the question regarding the regulation of the crypto market on the platform Qwoted and in reply, Robert R. Johnson, who is the Professor of Finance at Heider College of Business, Creighton University, shared his insightful opinions regarding the asset from a financial point of view.
Robert: “Bitcoin has been, and continues to be, a speculative asset because it has no intrinsic value. I have difficulty figuring out why anyone would invest in bitcoin other than for FOMO (the fear of missing out). Bitcoin is pure, unadulterated speculation. A speculator is betting that he will eventually be able to sell an asset for more than he paid. Bitcoin is more like gold than it is conventional financial assets like stocks and bonds. Warren Buffett has said “If you put your money in gold or other non-income producing assets that are dependent on what someone else values that in the future, you’re in speculation.” In other words, speculators rely on the greater fool theory — that they will find a greater fool than themselves to sell their asset to in the future.
Bitcoin has no place in one’s investment portfolio. Many of these speculators would be wise to be reminded of perhaps the most recent market bubble that occurred in residential real estate in 2007-8. Many speculators leveraged and purchased multiple homes with the intention of flipping them as the price rose. The popping of that real estate bubble precipitated the financial crisis.”
He also said:
Robert: “The only people that I believe should dabble in cryptocurrencies are true speculators. The market is attractive in many ways for speculators because of the volatility inherent in the markets.
I see no value and nothing but risk in Bitcoin.
When the SEC rejected the trading of a bitcoin ETF, it was acting on behalf of investors’ best interest. Legitimizing cryptocurrencies – and I believe that allowing trading of a bitcoin ETF would contribute to that – sets a very dangerous precedent. The lack of financial literacy among investors is dangerously low in the United States. Having a bitcoin ETF trading would make it seem like bitcoin is akin to investing in traditional assets such as stocks, bonds, and real estate, when in fact, it is pure speculation.
In my opinion, the SEC has erred in allowing the trading of various leveraged – and worse yet inverse leveraged – ETFs and ETNs. In the hands of professional investors they can be good risk management and portfolio hedging tools. But, in the hands of amateur investors they can be akin to weapons of mass wealth destruction.”
Robert explained in detail how the world attached with bitcoin depends largely on speculation. The bitcoin world largely seems to depend on people believing something will be more valuable in the future and selling it then can get one a big profit.
Illegal activities attached with bitcoin are pretty high. Usage of cryptos to buy illegal things and carry out illegal activities makes bitcoin one unattractive asset in the eyes of the general public. Moving forward, it remains to be seen whether the governments are able to curb out the negative elements linked to this world through regulation and official acceptance, if there is going to be any. As of now, the general vibe regarding the asset is largely negative. Negativities need to be eliminated out if it is to become something in the future.
Edited on 1/13/2019 4:20 PM PKT for slight correction