It seems you can’t turn on a radio or TV these days without hearing about Cryptocurrency.
Although it’s steadily gaining in popularity and becoming more mainstream, many remain leery. Morningstar recently posted an interview with Madeline Hume, Senior Researcher, author of Morningstar’s first Cryptocurrency Landscape Report.
During the interview Madeline debunked some of the myths surrounding cryptocurrency.
Myth #1: Cryptocurrency can help diversify an equity portfolio and may even be an inflation hedge.
Because this is a new asset class, it’s hard to put it into a particular box – there’s no predictability to how it will behave. Hume says too much is yet unknown to be able to confidently say it can add diversification in one way or another.
Myth #2: Fraud is rampant in cryptocurrency.
According to Hume, while there is fraud in cryptocurrency, the amount of fraud has grown in relation to the growth of the asset class. She reports the proportion of fraud has actually decreased over time and is currently at approximately 0.15% for all crypto transactions.
Myth #3: The adoption of blockchain technology is what’s driving the interest in crypto and in it’s performance.
Hume believes the opposite is true and shares that “rabid investor interest” in crypto is driving companies to ask themselves how they can incorporate blockchain technologies.
Myth #4: Cryptocurrency is easy to buy and sell.
Hume says it is easy to open a Coinbase account and start trading, but companies that make it easy to do so are charging hefty transaction fees.
The concept of cryptocurrency may seem far out – like living in a Jetsons' episode – but it’s here to stay.