By Isaac Ashby
As a computer science major at the University of Georgia, NIkolai Loparev said he has followed cryptocurrency since its inception.
Given the volatility in its markets, Loparev said cryptocurrency is mostly a tool for speculative investors.
“Until there is stability, the speculative feature of cryptocurrencies will continue to be the dominant factor of their use,” Loparev said in an email interview.
A year ago, the cryptocurrency market was booming. Two of the world’s most prominent coins, Bitcoin and Ethereum, were up big. Then, during spring 2022, the value of crypto started falling. This was attributed to a few things, particularly booming inflation and the war in Ukraine, according to The Motley Fool, an investment advice website.
The biggest blow to the market came in November 2022. FTX, a popular cryptocurrency exchange led by Sam Bankman-Fried, collapsed after reports emerged that the equity of Alameda Research, FTX’s sister company, was based totally on FTT, FTX’s own token. Events unfolded quickly after, culminating with accusations of fraud and Bankman-Fried’s arrest in December, according to Investopedia.
James Flannery, a lecturer at the University of Georgia’s Terry College of Business, said at least some of the renewed pressure to regulate cryptocurrency is because of FTX.
“There’s obviously been a ton of recent U.S. legislative pressure around crypto that I don’t want to say wasn’t there before, but it seems maybe different this time,” Flannery said.
Flannery doesn’t recommend college students should invest in any cryptocurrency tokens as it’s a complicated market to understand.
“If you’re following traditional laws of finance and investing, it’s a terrible asset to get into,” he said.
However, both Flannery and Loparev said cryptocurrency is worthy of study if the goal is educational.
“If you are interested in the underlying technology, and sort of the historical roots of how things like Bitcoin really came to be, I think you can learn a ton,” said Flannery.
Loparev echoed similar statements. “It is important for students (to) finish university with at least a modicum of understanding of the technology, volatility, and (speculative) market forces,” he said. “Owning a small, responsible investment . . .would be a good real-world introduction to many of these aspects.”
Meanwhile, despite the renewed interest in regulation, Flannery isn’t sure the fall of FTX will be enough to improve the state of the cryptocurrency market.
Flannery said two major events prior to the FTX collapse could have spurred legislation but didn’t. He cited the purge of the crypto-based drug trading site The Silk Road, and the attack on bitcoin exchange Mt. Gox.
The Silk Road was an anonymous way for users to buy and sell various narcotics and illicit substances. Continued growth of the site attracted FBI attention, which eventually led to the arrest of the site’s founder, according to the Fordham Journal of Corporate and Financial Law.
Mt. Gox was a prominent bitcoin exchange platform that filed for bankruptcy after hackers stole over $460 million in bitcoin.
But regardless of whether the collapse of FTX brings on regulatory legislation or not, Flannery said regulation will only “lead to . . . people creating new currencies or new platforms that skirt that regulation.”
Flannery, who teaches entrepreneurship at UGA, isn’t confident cryptocurrencies will achieve mainstream use. He said the technology may find niche uses, such as support moving money internationally as its platforms are unrestricted by geographic boundaries.
“I struggle to see mass adoption of a technology that has not found a widespread use case,” he said.
Isaac Ashby is a journalism student at the University of Georgia
