The Rise and Fall of Cryptocurrency—Again

2021 saw a meteoric rise in the value of Bitcoin and other cryptocurrencies. In addition, a reported 16% of Americans say they have invested in, traded or used cryptocurrency.

But over the last two months, the value has dropped significantly. In September, El Salvador made Bitcoin a legal tender in the country and lost more than 20% of its investment in the four months since, resulting in the International Monetary Fund asking the country to stop its embrace of the currency.

We have seen this song and dance before with cryptocurrency values dramatically rising and falling, but where do we go from here? 

According to Villanova University's John Sedunov, PhD, an associate professor of finance, people might have invested in crypto as a hedge against rising inflation in the last year because there weren't alternatives to the stock market, which itself has seen its fair share of volatility. If that trend continues and inflation concerns aren't erased, more Americans could invest in crypto. 

As crypto continues to work its way into the everyday vernacular, there could be an interesting player to help bring it more mainstream: traditional banks. Recently, JPMorgan announced a $12 billion investment into technology. JPMorgan, which has already launched one of its own digital coins, is ahead of the competition. 

"I think if anything is going to lead the way, as backwards as it is, it will be the traditional banks, specifically JPMorgan," Dr. Sedunov said.  "Their reputation will bring competitors to market, allowing for the potential to become more mainstream."

One of the key things, Dr. Sedunov notes, is that there needs to be wide knowledge and understanding about how cryptocurrency, and the blockchain where it's stored, actually works. 

"Until it's easier to understand and explain and becomes common knowledge, it's going to be a rough ride. It has to get to the point where the utility and ease of use is not trivial. It's very easy to buy it, but to spend or move it, it's a painful process to avoid fees. It has to be easier to access."