Harvard Economist Pushes Crypto But Admits Its Volatility

According to Marion Laboure, a Harvard University lecturer and senior economist at Deutsche Bank Research, cryptocurrencies cannot be ignored, even though their volatility has become a major issue for the investing public and the global payment system.

Photo Insert: The total crypto market cap in 2017 was $18 billion, and one Bitcoin was worth $1,000.

Laboure, who also wrote "Democratizing Finance: The Radical Promise of Fintech," published by Harvard University Press this year, said in an interview with the regular Project Syndicate section 'Say More' on June 15, 2022, that while many people – particularly in the West – still want cash, new forms of payment are emerging.

“We have to distinguish between cash as a store of value and cash as a means of payment. As a store of value, cash has not lost its position just yet. In the US, Europe, and Japan, cash in circulation has nearly doubled over the last 20 years, and it reached a new high during the pandemic, driven mostly by large banknotes. This is due to people withdrawing cash, which they view as ‘a safe haven’ to store value, especially during crises,” he explained.

Cash, on the other hand, is losing ground as a payment method. The pandemic has accelerated this trend significantly over the last two years.

The crisis accelerated the adoption of card and mobile payments by raising concerns that physical cash could be used as a vector for virus transmission and requiring people to make more online payments in the face of lockdowns and social distancing.

Sweden is the most extreme case, with cash in circulation now accounting for only 1% of GDP. In June 2019, Facebook announced the launch of Libra, its own stablecoin. Over the last three years, central banks and governments around the world have multiplied and accelerated their digital currency initiatives.

According to a Bank of International Settlements survey published in May 2022, 90 percent of central banks are investigating digital currencies.

The cryptocurrency market cap has dropped dramatically, from $1.57 trillion on May 8 – before the TerraUSD crash – to less than $1 trillion as of June 14, according to Laboure.

This was part of a broader decline in technology stocks, with the Nasdaq Composite down -31 percent year to date as of June 13's market close. However, this decline should be viewed in context.

The total crypto market cap in 2017 was $18 billion, and one Bitcoin was worth $1,000. The market cap of cryptocurrencies was $2.9 trillion in 2021 – the peak – and one Bitcoin was worth $67,000.

These values are now somewhere in the middle, at $1 trillion and $23,000, respectively. This highlights the extreme volatility of the cryptocurrency market.

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