Crypto currencies, explained by an expert

Crypto currencies are showing up in more and more places they weren’t five years ago, including Super Bowl advertisements. They serve as a more direct way to transfer value without the interference of large institutions, such as banks and governments. However, there are still a lot of questions about how these currencies operate and their future in our economy.

“Most of these cryptos have huge volatility, their dollar price is going up ten, twenty percent a day, and that’s because valuation is entirely based on investor sentiment and human psychology,” — Andrew Wu, assistant professor of technology, operations and finance at the Ross School of Business.

Listen: How things like Bitcoin and Ethereum operate today.

Guest

Andrew Wu is an Assistant Professor of Technology and Operations and Finance at the Ross School of Business. He has suggested caution when deciding whether to buy digital currencies, including Bitcoin. He explains crypto currencies are a type of virtual money where transfer activity is publicly recorded in an “online database, called ‘blockchain.’”

Wu says that digital currencies are a bit more volatile than fiat currency because their value is similar to gold, in that it’s based on the value that humans place on it.

“Most of these cryptos have huge volatility,” says Wu. “Their dollar price is going up ten, twenty percent a day and that’s because valuation is entirely based on investor sentiment and human psychology.”