I teach cryptocurrency at NYU. Here are 3 things crypto investors should know

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Since 2014, David Yermack, a Harvard graduate, professor of finance at New York University, has been teaching cryptocurrency courses. And when he’s not busy doing that, he publishes in academic journals such as The Handbook of Digital Currency and was even once a visiting scholar at the Federal Reserve. He says that when it comes to investing in crypto, there are three things people need to consider. Crypto investors should be aware of the high volatility of these assets, the unregulated nature of trading platforms, and the many frictions and delays involved in executing trades, Yermack says. Here is what he means:

Prepare for High Volatility Cryptocurrencies like Bitcoin often change value significantly in a short period of time. In May 2021, for example, Bitcoin suffered a 30% drop in a single day, and this is just one example among many. From day one, it’s been a risky investment for people, in part because of its purely speculative asset class, Yermack told CNBC in February. Trading venues are not regulated like stocks Demand for digital assets has increased, but some of the financial resources, protections, and models investors come to expect when trading traditional assets such as stocks and bonds are different in crypto, as MarketWatch previously reported. Securities and Exchange Commission Chairman Gary Gensler said in mid-September that he was investigating U.S. cryptocurrency trading platforms with the aim of strengthening investor protection in the nascent industry. Transactions May Take Time Cryptocurrency transactions may involve third party exchanges and transfers between the US dollar and the cryptocurrency, which can be time consuming. Depending on your payment method, selling cryptocurrency can take anywhere from seconds to days. It is also important for investors to understand the fees that can be associated with crypto trading. You can read more about the fees charged by the different exchanges here.

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