Crimson and Gold Connection; Dr. Michael Davidson

Welcome to Crimson and Gold Connection, keeping you connected with the people and current events at Pittsburgh State University. Glad that you could join me this week for the Crimson and Gold Connection on 89.9 KRPS, Fred Fletcher, FIRO. This week, a look at Cryptocurrencies. I'm joined by Dr. Michael Davison, an economics professor at Pittsburgh State University's KELSE College of Business. Professor Davison, thank you for joining me this week for the Crimson and Gold Connection. Thank you for inviting me. Today, we're here to take a little different look at the economy than you normally are normally economy that we talk about every day. It's the cryptocurrency economy. In your words, how would you describe the cryptocurrency economy? It's a summary that's never heard of it before. It is an investment that was created online, so it's not physical. We have to solve mathematical algorithms in order to gain credits that are called bethcoins, and then these credits, they are

really limited to these bethcoins, and it became hip to own one, so it became an investment, and with time, because of usage to some deal by criminals and Mexican cartels, I wanted to buy the Bitcoin in the United States and sell it in Mexico, because there's no trace. The demand for it went up, and certainly it became a viable investment, because it's gone up in value quite a bit, so it's caught on, and I believe with the stock market is thinking about selling futures, Bitcoin futures, but it's overall very risky. One of the things you brought up there about Bitcoin is that it's hip. It's serious. And it's not tied to anything physical, like normal currencies are, but it's tied to an idea or hipness. That is correct. It is almost a cult to be handed, and

you have followers that really are into the Bitcoin, and they like to buy it and trade it, however, like I said, it can never function as money, and it's only for the purpose of investment. So, as recently as December 11, Bitcoin jumped up to about $17,500 for one Bitcoin, as we record this interview, one Bitcoin equals about $8,500. What causes the Bitcoin to rise and fall? Lack of confidence. Remember, the stock market is driven by expectations. Now, if someone comes up that makes people afraid that it's going to lose value, they're going sell it, and it can drop quite a bit. It's gone up phenomenally. In 2011, I myself was thinking about buying a Bitcoin. Unfortunately, I didn't do it. I would be a millionaire today if I did.

It's driven by expectations on Ireland Greenspan, the former head of the Federal Reserve, called these type of expectations, irrational ubrans, meaning irrational expectations. Basically, the value of things can go like they did in the 90s during the Dockham Revolutions. We had companies that had not had any positive profits, meaning that they had lost incomes for years and years and years. Every year, the stock, the value of the stock, went up significantly. Eventually, that ended with a cross. That is analogous, I believe, to what happened with the Bitcoin. All this hype around the Bitcoin has been, I would say, resulted in people wanting to participate, and that increased the demand for it, but then the reality is,

it's worthless, it's what gives it value, it's just the demand. It doesn't have any intrinsic value at all. If the trading would stop tomorrow, it would be totally worthless. I'm speaking with Professor Michael Davison, an economics professor at Pittsburgh State University's Council College of Business about the future of cryptocurrencies and Bitcoin, and you've said something right there that tomorrow, it could be totally worthless. Yes. In doing some research for this topic, I came across people who are bearish on the future of Bitcoin. Yeah, and that could be just in the mind of, I would say, the investor. We all have different type of assumptions, but the reality is that, for example, China and South Korea are both thinking about banning it, and they are both the economies in Asia, and if that would happen, the demand would go down quite a bit, and there would be a crossing the value of Bitcoin, I believe. Another thing is, there have been

a lot of security concerns that have been online hackers that have been able to hack into our computers, private computers, and steal the Bitcoin because that's where it's kept, in order to be secure, you really have to save it onto a disk and then remove the disk from your computer. Now, there are also other types of cryptocurrencies that have been introduced. My basic, I would say, feeling it's going to decline in the value of the future. And that was kind of my follow-up question. Whether you thought we'd be talking about Bitcoin or another cryptocurrency here in the next five or ten years. Yeah, I think so, because like I said, it is here, but because you have all the other cryptocurrencies, then it's going to be just one or many, and it is expensive because remember that it is finite supply of the Bitcoin, and it's getting

more difficult to mine it, and now there are mining centers that have popped up across the nation, with major supercomputers or whatever. I try to mine this because it's getting increasingly more difficult to mine it, and that means that the supply is getting increasingly less. That, of course, is one of the attractions with the Bitcoin is to mine it, and if you're able to mine it, you're going to be able to sell it, and you have a significant income, but when that's gone, it's just like a piece of art. It might go up and down. One day, it might totally lose value because people don't like it anymore. One of the things we haven't even gone to is what you can buy with it today. Well, it can really never function as money because money has to function, has three functions. One is medium of change, and the other is unit of account, and the third is

store value. I've been speaking with Dr. Michael Davidson, an economics professor at Pittsburgh State University, by Bitcoin and the future of cryptocurrencies. Dr. Davidson, thank you for joining me this week on the Crimson and Gold Connection. Thank you. Join us for Crimson and Gold Connection Wednesdays at 850 and Fridays at 350.