NYU finance professor: Three things every new crypto investor should know

    17 Oct 2021

    David Yermack, a finance professor at New York University, taught cryptocurrency at NYU and was a visiting scholar at the Federal Reserve Banks of New York and Philadelphia. Now, he wants to share the three things every new crypto investor should know, MarketWatch reads.

    Here are his thoughts regarding crypto trading:

    At first, prepare yourself for high volatility. Cryptocurrencies like Bitcoin might change significantly in value in the short term. For instance, Bitcoin in May 2021 suffered a drop of 30% in just a single day, and there are plenty of such examples.

    “From day one, this has been a risky investment for people,” due in part to its purely speculative asset class, Yermack said.

    The second one, trading platforms aren’t regulated like stocks. According to MarketWatch’s previous report, demand has grown for digital assets, although some of the financial resources, protections, and patterns investors have come to expect when trading traditional assets, such as stocks and bonds are different in crypto.

    Last month, the US SEC Chairman, Gary Gensler, said he was investigating US cryptocurrency trading platforms to step up investor protections in the nascent industry.

    And finally, executing trades can take some time. Cryptocurrency trades might involve third-party exchanges and transfers from fiat to cryptocurrency, which can cause delays. Exchanging crypto can take from a few seconds to several days, depending on payment methods.

    Investors also should understand the fees that can come with trading crypto and read more about different exchanges charges before trading.

    David Yermack, Harvard-educated professor of finance at New York University, has taught courses on cryptocurrency since 2014. He’s also publishing in academic journals like The Handbook of Digital Currency and once served as a visiting scholar at the Federal Reserve Banks of New York and Philadelphia.

    “Crypto investors should be aware of the high volatility of these assets, the unregulated nature of the trading platforms, and the numerous frictions and delays involved in executing trades,” he says.

    Image Source: MarketWatch

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