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October 16, 2018

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The Case for an Artificial Value in Cryptocurrencies

November 7, 2018



At some level, the idea that not all of the expressed values of Cryptocurrencies are true is valid. In other words, the prices per coin that you see are not really the prices you should see. Related to this, a question that a lot of Crypto insiders and outsiders have been asking, especially during this bear market, is: what factors are influencing the trend of artificial values in coins beyond mere market volatility?


In another sense, we could ask: what is propping up coins that do not really have any intrinsic value or actual platforms? Today, Coindesk suggested the answer could be that it is hard to establish short positions on Cryptocurrencies.


Backing up their claim is research from Dr. Wang Chun Wei, who published a study last month on the option of reselling Cryptocurrencies and what influences that option. In it, Dr. Wei appears to have concluded that since he found a clear correlation between mispricing and what are commonly called heterogeneous beliefs, he also found that this supported the idea that most cryptocurrencies trade above their real values. While his language is a bit convoluted for the average person to understand, Coindesk’s article attempts to break down the research further. Through doing so, the article reminds reads that Dr. Wei is already known for concluding that Tether does not seem to truly have an impact on Bitcoin’s price swings, contrary to other research on the subject. Thus, it may seem confusing to some of you how he can conclude on one hand that Cryptocurrencies commonly show artificial value, while seeming to conclude on the other hand that Tether does not really create artificial value. If you are one of these people, then you are not off-base in thinking in this way.


While we will not speculate on Wei’s motivations in this fashion, based on the evidence at hand, we can conclude that there might be little correlation between his research. The reason behind this is simple. Wei and Coindesk point out that his newest research was based on coins that most people would consider to have “shady reputations.”


Perhaps, due to its market value, Tether just does not fit that bill, as of yet. 



By: BGN Editorial Staff

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