STARKVILLE — During Monday’s Starkville Rotary Club meeting, Bob Daniels, before introducing speaker Brian Blank, asked the assembly a question.
“How many, raise your hands, own a Bitcoin?” he asked.
Only two people raised a hand out of dozens present.
Blank, professor of finance at Mississippi State University, gave Rotarians an introduction on Bitcoin and other kinds of cryptocurrency, which have the potential to revolutionize the way money changes hands, but also face several public relations issues.
Cryptocurrency is a mostly unregulated digital currency that is separate from a government-backed currency, like the dollar. These currencies are held in digital wallets and are used for transactions. These transactions are publicly and permanently recorded using what is called a blockchain.
“I confess, I do not own a Bitcoin,” Blank said. “It turns out that Bitcoins, they’re kind of expensive right now. They’re worth a little bit more than I’m willing to invest.”
Since its founding in 2009, Bitcoin has risen to a value of more than $52,000 per coin, Blank said. It has led the way for a number of similar currencies such as Ether and Tether.
Blank said cryptocurrency relies on peer-to-peer transactions, removing the need for an intermediary such as a bank.
Cryptocurrency has also had plenty of negative news, such as the collapse of cryptocurrency exchange company FTX, which at its peak was worth more than $32 billion. Its founder, Sam Bankman-Fried, was convicted last year on federal fraud charges stemming from the company’s downfall.
Cryptocurrencies are also subject to wild swings in value. Bitcoin for example, has ranged from roughly $19,600 to $52,000 per “coin” in the past year.
These events, Blank said, have given cryptocurrency a volatile reputation. Other challenges include the lack of reliable public rating information, like what exists in stock trading.
The currency “is not a perfect substitute for something like dollar bills,” Blank said. “… I think the volatility is one of the important reasons for why that is the case.”
However, he said cryptocurrency is improving security and “is a solvable problem.”
He said governments around the world are exploring ways of integrating the benefits of cryptocurrency with their own backed currencies. The Federal Reserve has researched the possibility of a central bank digital currency. China has already introduced a digital version of its currency, the yuan.
Another innovation to look out for, he said, is a digital currency that allows easier conversions for cross-border transactions.
“When you want to go and transfer your dollars to euros or pounds or something like that, you generally have to do it through a bank or some type of financial intermediary,” he said. “Sometimes that’s not as efficient. You might like to be able to do that a little bit easier.”
Motivated to invest?
Blank said he has invested very little into cryptocurrency.
“I think it’s probably less than 1% of my assets,” he said. “If it goes to 0, my wife isn’t going to care. This is not going to impact our lives in a meaningful way. I think that’s not a bad situation to be. You definitely hear horror stories about people who have a lot of their net worth tied up in it, and I think that’s risky.”
Gary Blair, a retired banker with Southern AgCredit, told The Dispatch after Blank’s presentation that he appreciated learning more about cryptocurrency. He said he has friends who are currently or formerly invested in Bitcoin.
However, he said he doesn’t feel pressed to invest in cryptocurrency any time soon.
“I would have to learn a lot more about it, but actually I’m having lunch tomorrow with a guy who is invested in it, so I’m going to talk to him more about it,” he said.
Kevin Edwards is news editor and reports on Starkville and Oktibbeha County government.
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