A South Korean professor at Hongik University believes that cryptocurrencies could not be safe from the market downturn.
Professor Hong Ki-hoon, from the University of Hongik in South Korea, commented that cryptocurrencies like Bitcoin (BTC) are not a “safe-haven asset”, as are gold, dollars, or even bonds of the United States Treasury.
However, although the professor indicated that users should not consider these digital assets as havens, he does not deny that the current volatility of traditional financial markets is causing more money to accumulate and more people to turn to the crypto market. Local media recently informed this information.
To explain his opinion, Ki-hoon said what conditions must be met by digital assets to value havens. “To be a safe-haven, two conditions must be met. First, the volatility of the asset’s value must be low, and second, when market volatility is expected to increase, the value should rise. Therefore, cryptos do not meet with the conditions”.
Hong, from the Business Administration department of Hongik University, also explained why more users have lately resorted to buying cryptocurrencies. “The reason for the volume increase after the markets slump was that the spirit of investing in increased volatility worked to offset the depreciated value of assets,” he said.
In an article, Hong also details concerns that some governments have regarding “cryptocurrency market manipulation.” They fear that these digital assets will cause destabilization in the national and traditional economies.
In the text, Hong states that the crypto environment is not sufficiently regulated in the country to operate safely and protect users. The professor believes that the current popularity of the market does not alleviate the concerns of investors who still doubt whether or not to buy cryptocurrencies.
On the other hand, an investment expert who declined to reveal his name commented that: “Individual investors are often unable to adequately manage equity risks, but it is virtually impossible to gauge the risk factors of cryptocurrencies. You have to understand them. before fully investing.” This means that those who do not prepare or research to face the subject are at greater risk.
Last May 27th, the South Korean Ministry of Economy and Finance said the country is preparing to amend the nation’s Income Tax Law. This movement could affect the profitability of cryptos within the country, by making mining costs higher or imposing restrictions that hinder the operation of miners and traders.
South Korea has a large number of investments in cryptocurrencies, technological developments, and large crypto exchanges. However, the government of South Korea is not interested in cryptocurrencies.
Cryptocurrency regulations in South Korea are strong, until now. The government banned ICOs, whilst local crypto exchanges have closed or are under more supervision. The South Korean government is concerned about money laundering, tax evasion, and excessive speculation that some users may try to do with cryptocurrencies. Hence, lawmakers are expected to continue trying to impose new restrictions. Every user can make a positive change, by doing nothing that puts the population at risk.
By María Rodríguez
