Bitcoin ( BTC-USD ) in recent days leapt past the symbolic round number of $40,000 and the 50-day moving average of $42,800, as traders hoped for a sustained rebound of the cryptocurrency after a significant sell-off.
But the asset is hardly out of the woods, says Vikram Mansharanmani, a lecturer at Harvard University and author of ” Think for Yourself: Restoring Common Sense in an Age of Experts and Artificial Intelligence .”
Mansharanmani, who recently spoke to Yahoo Finance’s Akiko Fujita for a special program called “Future of Finance,” predicted major ups and downs for cryptocurrency investors in the coming years.
But ultimately, Mansharanmani expressed optimism about the fate of digital assets, saying cryptocurrency could become a modern-day equivalent of precious metals like gold that offer investors a hedge against riskier assets.
“I think there’s going to be a lot of activity in decentralized finance and cryptocurrencies,” he says.”That world is going to be really exciting on a five-plus year view.”
“There’ll be a lot of volatility,” he adds.”People need to buckle up and go on the ride, but it is going to likely work out well.”
The remarks come after bitcoin suffered a massive downturn in January, falling 18.2% and losing more than $44 billion in value.
As the Federal Reserve signals a rate increase in March, some investors have fled risky assets like bitcoin that may have been elevated by pandemic stimulus.
The volatility in the space also owes in part to the uncertain regulatory environment.Treasury Secretary Janet Yellen last July urged speedy adoption of rules for stablecoins, a form of cryptocurrency that pegs its value to a commodity or currency, like the U.S.
dollar.
In this Friday, Dec.8, 2017, file photo, a man uses a Bitcoin ATM in Hong Kong.On Thursday, Jan.11, 2018, the value of numerous forms of digital currency tumbled after South Korea, a hotbed for currencies like bitcoin, said it was weighing a trading ban.
(AP Photo/Kin Cheung, File) In August, SEC Chair Gary Gensler described the crypto market as the “wild wild West” and has since indicated a desire to regulate it.
While prominent critics of bitcoin question its efficacy as a form of money, many bitcoin supporters say it can be used for transactions, and point to companies like Overstock.com ( OSTK ) and Starbucks ( SBUX ) that offer customers ways to pay in bitcoin .
Story continues Mansharanmani said the primary role of cryptocurrency may end up deriving from its status as an alternative investment for traders concerned about devalued currencies.Taken in that light, it could prove a safe bet for investors akin to scarce precious metals like gold, he added.
The number of bitcoins will be capped at 21 million, granting it a scarcity similar to that of such raw materials.
“I think we need to see and pay attention to what’s happening with central banks,” he says.”If the political motivation is to constantly print money and debase currencies, keep going, what investors should do to hedge from that risk is buy currencies that cannot be printed, things that will be forever scarce.”
“Historically, that was gold, silver, precious metals,” he adds.”But in a more modern era, in a digital era, one that may appeal to millennials and sort of younger folks that are more digitally native, you might think that well, cryptocurrencies and bitcoin might be a digital version of that non-printable currency.”
Max Zahn is a reporter for Yahoo Finance.Find him on twitter @MaxZahn_ .
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