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Crypto Clarified: Is Crypto Currency a Fad?

October 01, 2021

In this episode of Crypto Clarified, Head of Digital Asset Research Matthew Sigel explains how the cycle of new technologies applies to cryptocurrencies and why they are here to stay.

Is it a fad? Let’s remember that on the day that Apple Computer went public in 1980, investors in the state of Massachusetts were not allowed to touch that stock because the security was deemed “too risky” – they were unprofitable. Today it’s the most valuable company in the S&P 500.

I would make a similar analogy with crypto, you can find plenty of examples in history of luddites or control freaks rejecting, or trying to slow down, a disruptive new technology because of edge use cases that may be distasteful to some, but what we find in the end so often is that technological progress doesn’t wait, because open source beats closed, global beats local, free beats vs. expensive. And we think digital assets win on all of those. And so while the vast majority of these new monetary policies may not find long-term traction, and many of these tokens may disappear, some number will persist and provide investors with a choice of where to allocate their capital. The underlying technology which builds on decades of research by cryptographers and mathematicians, many of which have won Turing Award prizes which is the Noble prize for mathematics, validates that view that the technology is disruptive. The first killer app that was built on top of that innovation was bitcoin. We can argue that the second was Ethereum. Stablecoins are another. No doubt there will be many more. So, far from a fad in our view.

IMPORTANT DISCLOSURE

The views and opinions expressed are those of the speaker and are current as of the video’s posting date. Video commentaries are general in nature and should not be construed as investment advice. Opinions are subject to change with market conditions. All performance information is historical and is not a guarantee of future results. Any discussion of specific securities mentioned in the video commentaries is neither an offer to sell nor a solicitation to buy these securities. All indices mentioned are measures of common market sectors and performance. It is not possible to invest directly in an index. Information on holdings, performance and indices can be found at vaneck.com.

Cryptocurrency is a digital representation of value that functions as a medium of exchange, a unit of account, or a store of value, but it does not have legal tender status. Cryptocurrencies are sometimes exchanged for U.S. dollars or other currencies around the world, but they are not generally backed or supported by any government or central bank. Their value is completely derived by market forces of supply and demand, and they are more volatile than traditional currencies. The value of cryptocurrency may be derived from the continued willingness of market participants to exchange fiat currency for cryptocurrency, which may result in the potential for permanent and total loss of value of a particular cryptocurrency should the market for that cryptocurrency disappear. Cryptocurrencies are not covered by either FDIC or SIPC insurance. Legislative and regulatory changes or actions at the state, federal, or international level may adversely affect the use, transfer, exchange, and value of cryptocurrency.

Investing in cryptocurrencies comes with a number of risks, including volatile market price swings or flash crashes, market manipulation, and cybersecurity risks. In addition, cryptocurrency markets and exchanges are not regulated with the same controls or customer protections available in equity, option, futures, or foreign exchange investing. There is no assurance that a person who accepts a cryptocurrency as payment today will continue to do so in the future.

Investors should conduct extensive research into the legitimacy of each individual cryptocurrency, including its platform, before investing. The features, functions, characteristics, operation, use and other properties of the specific cryptocurrency may be complex, technical, or difficult to understand or evaluate. The cryptocurrency may be vulnerable to attacks on the security, integrity or operation, including attacks using computing power sufficient to overwhelm the normal operation of the cryptocurrency’s blockchain or other underlying technology. Some cryptocurrency transactions will be deemed to be made when recorded on a public ledger, which is not necessarily the date or time that a transaction may have been initiated.

  • Investors must have the financial ability, sophistication and willingness to bear the risks of an investment and a potential total loss of their entire investment in cryptocurrency.
  • An investment in cryptocurrency is not suitable or desirable for all investors.
  • Cryptocurrency has limited operating history or performance.
  • Fees and expenses associated with a cryptocurrency investment may be substantial.

There may be risks posed by the lack of regulation for cryptocurrencies and any future regulatory developments could affect the viability and expansion of the use of cryptocurrencies. Investors should conduct extensive research before investing in cryptocurrencies.

Information provided by Van Eck is not intended to be, nor should it be construed as financial, tax or legal advice. It is not a recommendation to buy or sell an interest in cryptocurrencies.

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