Bauer Professor Offers Perspective on Bitcoin Debate
Bitcoin and other types of cryptocurrency have dominated business discussion in recent months.
The quick history: New types of global currency – free of traditional banking regulations and oversight – were predicted to become a significant percentage of business transactions within a decade or so.
Then, investors poured more than $4 billion into initial coin offerings with the launch of Bitcoin futures in 2017. A wild market ride ensued, with the cryptocurrency reaching a high of $19,345 to the U.S. dollar on Dec. 16 and dropping to near $6,000 in January 2018.
Foreign governments such as China and South Korea have recently moved to close cryptocurrency exchanges. The U.S. Securities and Exchange Commission is now insisting on compliance with existing federal regulations. The Texas Securities Commission has shut down some cryptocurrency operators out of concern for fraudulent activities.
As news media have followed the story, they have relied heavily on Bauer College Finance Professor Craig Pirrong to offer perspective.
His comments on various aspects of Bitcoin-related matters have appeared in recent publications of Vanity Fair magazine, The Washington Post, USA Today, Bloomberg News, Business Insider, The Wall Street Journal and elsewhere.
What’s next for cryptocurrency?
Pirrong may be a longtime observer of financial markets and the SEC, but he readily admits to not having the answer to that question. And he continues to counsel taking a cautious view.
“I am skeptical about the long-term prospects for cryptocurrency because of its limited utility as a currency,” he says.
“Existing cryptocurrencies are not an economical way to make most transactions, and their prices are far too volatile to make them a good store of value. They have also proven to be shockingly insecure. Many others obviously disagree though, and until that disagreement is sorted out the best prediction is continued extreme unpredictability.”
By Julie Bonnin