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Riding the crypto rollercoaster

Investors should take a long-term view and try not to be spooked by recent drops in cryptocurrencies, says a Bond University expert.

Rand Low, Associate Professor of Quantitative Finance at the Bond Business School, says long-term investors will understand that riding out the rollercoaster is the key to success in what can be a volatile market. 

“Crypto markets have always been highly volatile so they will rise again,” said Dr Low.

“A good analogy for this is the dot-com crisis of the 2000s. Although tech stocks took a beating then, they have been the darlings of the US stock market for the past 10 years and for the foreseeable future. Investors should take a long-term view.”

Dr Low said the cryptocurrency plunge was a result of global inflation pushing up interest rates, causing volatility on other investment assets such as stocks and bonds, and the rise in commodity prices due to geo-political risks caused by the war in Ukraine and supply chain disruptions.

“Cryptocurrency is still considered the frontier of investing,” he said.

“It is a largely unregulated market for a new type of technology that could transform how we purchase, sell and manage organisations globally.

“We have seen sudden dips in other investment classes such as stocks. Often this can happen due to “spill-over” or “contagion” effects. What this means is that fears in another market – corporate bonds, fixed income, and stocks, for example - can spill over and impact prices in other unrelated assets such as cryptocurrencies.”

Dr Low said the cryptocurrency rollercoaster would continue, going through another volatile period of ups and downs for the rest of the year, but those with a long-term commitment should be able to weather the storm.

He said there was a range of information and resources for those interested in learning more about cryptocurrency. Bond University’s free microcredential From Barter to Bitcoin offered useful advice for those wanting to learn more about cryptocurrencies or consider investing in digital assets.

Dr Low is also hosting a free public lecture, Cryptocurrency, digital assets and the DAO, at Bond University on May 19 aimed at those with no prior knowledge of cryptocurrencies.

“We will be discussing how blockchain can help increase customer reach, optimise management decision-making and make business processes much more efficient,” he said.

“I’d encourage anyone with an interest in cryptocurrency as a technology enabler or an investment strategy to tune in.”

Bond University is hosting a number of public lectures as part of its 2022 Homecoming Program.

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