Chiavarone Thinks Cryptocurrencies Could Be In Trouble
Steve Chiavarone, vice president and portfolio manager at Federated Investors, claims that cryptocurrencies are neither an effective medium of exchange nor a good store of value. He also says that the US Federal Reserve will have to eventually “kill” crypto, because it wouldn’t be possible to create a monetary policy around it, due to its limited supply.
Mr. Chiavarone has been quite vocal about his opinions regarding cryptocurrencies lately. He believes that there’s a “mountain of greed” building around the crypto-market. In his opinion, “it’s the first sign of greed since the Great Recession [of the late 2000s]”. He asserts that this “greed” could very well contribute to a surge in the equity markets, irrespective of the fate of bitcoin.
Fear Created By the Great Recession
He goes on to state that he has been bombarded with questions regarding cryptocurrencies from numerous clients. This is somewhat similar to what investors were doing in the 1990s when people were greedy about high returns, even if there was significant volatility. However, this greed quickly transformed into fear when the Great Recession of 2009 hit the global financial markets, according to Chiavarone. So, is it possible for the same kind of fear to manifest itself around the crypto-market, resulting in an epic crash?
Remember What Happened to Pets.com?
Back in August 1998, during the dot-com craze, a company by the name of Pets.com emerged. Led by an overhyped and aggressive marketing strategy, with its silly socket puppet mascot making appearances on Good Morning America and People magazine, the company’s operations came to a grinding halt in November 2000. This was primarily due to the company not being able to generate enough profits through its sales and lacking proper business acumen. Approximately $300 million in investments were wiped out as result of the company’s demise.
Anyway, so what does this have to with bitcoin? Well, according to Mr. Chiavarone, the same thing that happened to Pets.com will also happen to bitcoin. This comparison sounds rather foolish considering that Pets.com and bitcoin are nothing alike. Nevertheless, this kind of misinformation propaganda has shown its power to influence the decisions of many investors.
Many people have been driven away from excellent opportunities by the words of a few people who are considered to be an authority on something. For instance, even Warren Buffet has said that cryptocurrencies will have a bad ending. However, at the same time, he claims to not know much about them.
So, how can you believe the words of such people? Since it’s not their area of expertise, they should not be relied upon for giving opinions on something they have little or no understanding of. Unfortunately, many people do. Just the way many people think they are capable enough to offer medical advice simply by reading what’s on the internet.
A Believer in Blockchain Technology
Mr. Chiavarone’s opinion cannot be completely discounted. He seems to think that blockchain technology could ultimately save cryptocurrencies. He feels that finding more ways to use blockchains might result in crypto-trading becoming more transparent. It’s unclear how he arrives at this conclusion, but he also says that increased transparency could also lead to less volatility in the crypto-market. He then adds,
“If the first version of the Internet was an Internet of information, blockchain is an Internet of value. It allows for the digital transfer of files in a way that’s verifiable. It digitizes trust.”
To his credit, these words do capture some of the vast potential benefits of the blockchain. However, there’s no need to rely on “expert opinion” all the time. We must put in the effort to perform our own research and formulate our own opinions that we can trust and be confident about.