Cryptocurrencies are for gamblers, not investors

ON Dec 19, 2017, the Monetary Authority of Singapore (MAS) advised caution over cryptocurrencies. For me, as a professional economist, cryptocurrencies are mostly about entertainment, the excitement I get from seeing their price go up and down. They are certainly not money. I see no reason to invest in them, I am not a gambler. Let me explain.

Cryptocurrencies do not satisfy the basic requirements of money. They are not currencies. Their prices in real money are too volatile to make them useful for measuring value or storing wealth. They are useless in risk management. I encourage anyone interested in cryptocurrencies to read at least the seven- and-a-half-line long abstract of an academic article on the subject by David Yermack (NBER WP19747). It is available online, no Bitcoin, or any coin needed to access it.

If cryptocurrencies are not currencies, I would advise all governments to insist that sellers call their cryptos something else than currencies to stop misleading the public. I will call them here crypto cyber units (CCUs) to preserve the excitement and minimise the confusion.