With constant media coverage about prices “near zero,” many investors are asking themselves, “Is investing in Bitcoin worth it?” In this article, we’ll look at a few different stories related to what economists and academics have to say about investing in cryptocurrencies. We’ll also try to get a better understanding of what impacts these evaluations.
Economists play an important role in predicting the future of the global economy. They have traditionally been instrumental in helping governments, businesses, and individuals make decisions that impact the world. Now, many economists are beginning to research and predict what the future of cryptocurrency and blockchain financial services will look like.
In the cryptocurrency market, there are a number of factors that go into determining the market outlook. For many economists (as well as investors), price volatility due to technical limitations, regulations, and market adoption has made it quite difficult to predict price changes.
For example, in January 2018, Yale University economics professor Robert Shiller said, “[Bitcoin] might totally collapse and be forgotten, and I think that’s a good likely outcome, but it could linger on for a good long time, it could be here in 100 years.”
While this prediction is far from certain, it is indicative of how many economists view the cryptocurrency market. We also see that increased pessimism seems to follow recent market trends.
Flash-forward past the January all-time high price point for many cryptocurrencies, and there are many new reports and quotes from economists that look at cryptocurrency in a negative light. What’s important to understand is that some are backed by research. For example, two economists stated in July 2018 that the price per Bitcoin should only be around $20, instead of the $7,400 mark (price in early August 2018).
This number takes a few different factors into consideration like the current supply of Bitcoin in circulation and its daily usage in transactions. According to these two economists, the use of Bitcoin would need to increase 1000x in order for its actual price to equal its current value.
Back in March 2018, Harvard economist Kenneth Rogoff said, “Basically, if you take away the possibility of money laundering and tax evasion, [Bitcoin’s] actual uses as a transaction vehicle are very small.” Rogoff also said that the price of Bitcoin is more likely to be $100 rather than $100,000.
One of the biggest questions to ask is whether we are currently in a Bitcoin bubble or merely in a Bitcoin dip. Many economists and financial experts looked at the price fall that took place in January 2018 as a sign of the big bubble burst. Others, like the above example, look at it as just part of a larger bubble. Still, it’s easier to say that prices will collapse to “near zero” when they’ve been consistently down.
On the other hand, it’s possible to also see the price declines in 2018 as merely a Bitcoin dip. It’s important to also share the work being done by economists that is pro-cryptocurrency.