The prices of some cryptocurrencies have fallen sharply in the past few days. This continues the trend. For example, Bitcoin and Ethereum have lost nearly half of their value since November. But Fabian Scheer of the University of Basel cautions against seeing the technology’s value in the course price alone.
Fabian Scherr is Professor of Blockchain and Financial Technology at the University of Basel’s School of Economics. He is also the Executive Director of the Center for Innovative Finance at the University of Basel.
SRF News: How do you explain this crypto price crash?
Fabian Scheer: I think you have to be very careful not to always look for short-term explanations. This is also often psychological and ultimately also a matter of exactly what time period you are looking at. If things continue to rally for an extended period of time, there could be a correction at some point. It is always difficult to attribute the decline in value to a specific event.
Strong volatility is not uncommon in cryptocurrencies. It may have changed in the last year Formed bubble burst now?
These powerful movements are nothing special. We’ve seen this many times, in 2014 and 2017. And of course: if there are strong increases, there can always be a correction, especially in highly volatile markets, like with crypto assets.
Where do you see the main drivers of this decline in value?
It is always difficult to prove causation. But the important factor is some general uncertainty, especially in the stablecoin space. These are crypto assets that are pegged to classic currencies, such as the dollar. There are always concerns that it may not be properly secured.
One should beware of praising crypto assets when they go up and canceling everything when they go down.
There are also venture capital firms with a lot of money tied up in these markets that may now lack the liquidity to make additional purchases. Institutional investors are only in the process of opening up these markets, as the buying power of the big players may still be lacking.
Has confidence in cryptocurrency suffered?
You can’t say that in general. You have to differentiate which crypto assets you’re talking about, they are structured very differently. And also be aware that price is probably the least exciting question. One should beware of praising crypto assets when they go up and negating everything when they go down. Technology is the exciting thing, and a lot has happened there.
The big problem is that these assets continue to skew the currency’s image.
They say that the success of cryptocurrencies does not depend on their value. Then how do you connect it to it?
Ultimately, it’s a technology of incredible value to society. The point is, we have the ability to create databases that are run by the general public and that anyone can control. Also, the issuance of independent assets, that is, investments, is an incredible innovation. So the price is kinda secondary. It is primarily about the possibility of an independent, open and transparent database.
Cryptocurrencies are now considered the national currency in some countries. Wouldn’t this drop in value damage it?
By definition, of course. If the price goes down, it hurts the counter currency. But I think the big problem is that these assets – which I stubbornly call crypto assets to distance myself from the term cryptocurrency – are still misrepresented as currencies. For example, Bitcoin is very exciting and can still be very exciting as a diversification tool, but not necessarily as a means of payment.
The conversation was conducted by Sandro Della Torre.