Tom’s Take on the Effect a Crypto Crash Might Have
Transcript:
Easan Arulanantham:
So what’s the effect on the market as a whole if you know, crypto currency crashes? And what should my worry be as an investor that doesn’t hold any crypto?
Tom Vaughan:
Yeah, so here’s my outlook on crypto, I think that it’s a little early to tell exactly what might happen. But it is a competitive asset classes stocks. So if money is being taken away from the stock market, and even people selling stocks, that was one of my things I talked about last week was that people seem to be selling off, you know, the ark funds and the clean energy and those types of things that did so well last last year. And all of a sudden, we’re seeing, you know, Robinhood crash, trying to do all the crypto currency, you know, trades to me, that means that there’s money going from one place to another. And so it is a competitive asset class.
So as as, as, as anything, whether it’s real estate, or bonds, or CDs at the bank, or cryptocurrencies, all of those can draw money away from the stock market. I mean, they didn’t get 10 years 10% CD, you know, a lot of people are going to do that instead of buying stock. So if you think you can get rich by in crypto, you know, that people are doing that right now. So they’re, at least in the short term, we’re seeing I think, kind of an inverse relationship as cryptocurrencies go up, the stock market could kind of, you know, just not do as well as that good. That’s for sure. And like yesterday, which was a great day for the stock market, you know, cryptocurrencies in general came down, so, I don’t know, I think I think we will see an inverse correlation, when you see cryptocurrencies going up, you might see the market kind of slowing down, and when you see cryptocurrencies going down, and so we’ll see that’s something I’m looking for, I think the biggest concern I have is it’s an unregulated industry.
Now they’re working on that, but right now, it’s completely unregulated. And you can do leverage, so you can borrow on margin and buy cryptocurrency at very, very high rates of margin like 100 to one. And if that happens, that’s where you kind of can see some problems. Where if cryptocurrency crashed, and there was a lot of it on margin, and a bunch of people had to sell other things that you and I own in order to pay off those margin debts. That could be a pretty big impact to the market. But again, it’s a fairly private, unregulated industry, it’s hard to tell how much margin is being used. Generally speaking, in my experience, people get a little carried away right I mean, Tulipmania is a human condition and so that does mean that once people make a little bit of money they think oh, if I borrow money I could make even more you know, until they get into sucked into this whole where they end up losing their fortune, you know, but so that that’s that’s what I see with cryptocurrency. I think it is something to watch. Definitely. It is something we’re watching. As far as that goes at the moment. I think it’s probably okay and maybe just making things a little softer, but otherwise, I think it’s fine.