00:00:00
John Zhang: I definitely
agree with that. I think that— certainly that there is still a
way to go, right? So you have
00:00:07
some— the financial institutions
that get involved in this. But you don't really see a lot of
pension funds, for instance,
00:00:13
that want to invest their money
into the cryptocurrency. You don't see the sort of
sovereignty funds, and— for some
00:00:19
of the countries and that will
begin to invest in the cryptocurrency. Once those
things happens, I think that
00:00:25
you're going to see that the
market potential is huge. Dan Loney: What's the—
what's, then,
00:00:29
the key driver, then, to
start to see that occur, do you think?
- Well, I think that— number one, that you
have these young people who are
00:00:37
very enthusiastic about the
cryptocurrency, and these are the future of the country,
right? So you never bet against
00:00:45
the young people. I think once
those people basically go out there and basically push for the
sort of regulation, push it for
00:00:52
the— for the technology change,
and cut down the cost of the process, and Bitcoin and so on
so forth, it will become a
00:01:00
widely spread currency. I
think that's one part of it. That will happen. I think the second
is basically that once you have
00:01:07
a more— a sort of a certain
regulatory environment, you can imagine the institutions will
see the potential and they will
00:01:14
jump in. Once they all start
jumping, of course, that— I think that we have a really bright
future there.
00:01:21
- Welcome to <i>The Ripple Effect</i>,
the podcast that takes you on a
00:01:25
journey through the minds of
Wharton faculty. I'm your host, Dan Loney, and in each episode,
we'll be diving deep into the
00:01:31
inspiration behind the
groundbreaking research that Wharton professors have
conducted, and exploring how
00:01:37
their findings resonate with the
world today. - How then, do some of the instances of fraud
in and around cryptocurrency
00:01:47
factor into the perceptions of
the public, and then potentially impact either their buy-in, stay
out, the pricing component? I
00:01:56
mean, we've certainly seen a few
instances that would— you would think would move people away
from it.
00:02:02
Dave Reibstein: So you would think,
whenever there's— you know, any hint of fraud— you know, the big arrest
of Sam, you know, Bankman-
00:02:09
Fried, you know, you would
anticipate this is just going to crash the market. I actually
have been surprised how
00:02:15
resilient the market is. That
there's been these sort of instances that have happened,
and yet, the market has been
00:02:23
surprisingly stable through all
of that. And— and so it sort of says people believe in this
overall concept more than, you
00:02:31
know, this individual or that
particular individual. It hasn't affected the overall industry.
Well,
00:02:36
Well, that's the interesting thing as
well, is that we've seen this absolute surge in pricing,
especially around Bitcoin, in
00:02:43
the wake of, you know, FTX and
all these concerns. Obviously it's more tied to, as you said
before, the results we saw in
00:02:50
the presidential election. The
Trump family, maybe, being a close advocate of cryptocurrency
now. So it is reactive to a lot
00:02:58
of different factors. I actually agree with what Dave
just said. I think that if you
00:03:03
look at— into the cryptocurrency
market, and that market is so big today, and there are so many
people who are involved in this
00:03:11
particular industry. And it's
almost like the US dollar, for instance. You have scandals
here and there, and you
00:03:17
basically have the dirty
money. You have the tended money. All kind of different
scandals going on there, but it
00:03:24
doesn't really overall affect
the value of dollars. And— but I think for cryptocurrency, we
probably have gone beyond the
00:03:31
point, I think certainly in the
last couple years— we've gone beyond the point where a small scandal
somehow is going to sink the
00:03:38
whole boat. And that probably is
not going to happen. I think that— I would imagine that going
forward, and— the market can
00:03:46
easily absorb a lot of other
scandals. - Dave? On a small scale, that's totally
true. I mean, we haven't seen
00:03:53
anything big that's going to
happen. And I think it's pretty
resilient. - It's hard to have a big one.
00:04:00
I think it is to have a big
one, simply because the market is so
distributed and so many people
00:04:04
actually hold the
cryptocurrency. And not only that, in fact, it's very
difficult for any institution to
00:04:12
unilaterally change anything in
the marketplace. I think, given that, I would imagine going
forward, that the scandal
00:04:19
probably have a less and less
impact in the market. Because they know that there's a
component of that kind of built
00:04:25
into what you're getting into in
this marketplace anyway? - Exactly. Yeah. - I mean, part of it is this whole
notion of distributed trust. And
00:04:34
it's one of the things we're
looking at, is, people that believe in distributed trust are
those that are more likely to be
00:04:41
investing in crypto. And take it
away from the major institutions. So there's no one
institution that holds so much
00:04:49
power in the overall system. And
that's what has attracted a number of people to— to the
currency.
00:04:54
How do you think
that impacts finance in general,
then, potentially? Because a lot of people have
talked about, you know, are
00:05:01
we starting to round a curve in
terms of the importance of cryptocurrency in kind of the
investing landscape?
00:05:07
Dan, there's no question what we see,
some of the major banks are investing in cryptocurrency,
just to, you know, balance their
00:05:14
portfolio. And so we're going to
see this distributed amongst the institutions. It was
supposed to be this non-
00:05:21
institutional entity. And now,
the institutions are really investing in it. I definitely agree with that. I
think that— certainly that there
00:05:31
is still a way to go, right? So
you have some of the financial institutions that get involved
in this, but you don't really
00:05:37
see a lot of pension funds, for
instance, that want to invest their money into the
cryptocurrency. You don't see
00:05:43
the sort of sovereignty funds
for some of the countries, that will begin to invest in
the cryptocurrency. Once those
00:05:50
things happens, I think that
you're going to see that the market potential is huge.
00:05:54
What's the— what's, then, the key
driver then to start to see that occur, do you think?
- Well,
00:06:00
I think that number one, that you
have these young people who are very enthusiastic about the
cryptocurrency, and these are
00:06:08
the future of the country,
right? So you never bet against the young people. I think once
those people basically go out
00:06:15
there and basically push for the
sort of regulation, push for the for the technology change and
cut down the cost of processing
00:06:24
Bitcoin and so on and so forth,
it will become a widely spread currency. I think that's one
part of it that will happen. I
00:06:31
think the second thing is basically
that once you have a more— a sort of a certain regulatory
environment, you can imagine the
00:06:38
institutions will see the
potential and they will jump in. Once they all start to jump in, of
course, that— I think that we
00:06:45
have a really bright future
there. - Dave? I mean, I can't argue with that at
all. I think it's absolutely the
00:06:52
case. And as it spreads more and
more to— to more of us individually, owning them,
00:06:57
it's going to be hard
for it to falter. So that then kind of leads me
into my next question— is, where
00:07:04
is, then, the future kind of
larger scale ownership in and around cryptocurrency? Is it
going to be through 401ks and
00:07:14
different accounts? Is it going
to be individual? Where is the path potentially leading us?
Where do you think?
00:07:21
So I think we are going to see
it more and more in our 401ks. It's basically— you could—
you could think of it as, this
00:07:29
is just another one of my stock
holdings that I have. It's part of my portfolio. I'm going to
have it, you know, in my
00:07:36
retirement fund, I'm going to
have it in— in my speculative fund that I have. More and more,
that's going to end up
00:07:43
happening. And we can just treat
it like we would any other investment. One of the things,
by the way, I find humorous—
00:07:50
we've asked people, "Do— would you
want to be paid in in crypto and or would you rather be paid in
cash?" And people say, "I want to
00:08:00
be paid in cash." However, if you
have crypto, "I don't feel bad about paying with crypto." So, I
don't fully trust it yet, but
00:08:09
we're going to get to this stage
where people say, "Pay me in crypto, and I want to invest
00:08:14
in crypto, just as
I would any other stock. Well— so it's interesting,
because you've seen different
00:08:20
companies kind of dip their toe
in the cryptocurrency water, in that— in that realm of accepting
cryptocurrency, you know, for
00:08:28
payment on different services.
Which is an interesting pattern, obviously, that it's so
different from what we've seen
00:08:33
in the past, because the company
that's accepting the crypto is also, to a degree, speculating
on what the value of that
00:08:41
currency is going to be as you
move forward down the road. Absolutely. I think that if you
feel really optimistic about the
00:08:48
future, there probably is
something that you want to do, and obviously that if pension
funds begin to get into it, I
00:08:55
think that that particular asset
class will become a whole lot less risky, for sure. And I think
one of the things I— in this
00:09:02
context, I want to add is that,
as marketing professors, and obviously, that— we really think
that the marketing will play a
00:09:08
huge role in this whole process
of actualizing the value of the cryptocurrencies. The reason is
because they all use more or
00:09:17
less the same kind of a
technology, right? So they all don't have a intrinsic value. So
ultimately, I think that is
00:09:24
marketing efforts that you're making.
And that probably will make a huge difference in terms of
whether or not— and the whole
00:09:30
industry is going to consolidate
on you, versus somebody else. So I'm really glad you brought
that up, not just because we're
00:09:36
marketing professors. Of course
we want to bring that up. But one of the industries that
invest a lot in advertising is
00:09:43
actually financial institutions.
And why? Well, I want you to have confidence in us. And so
what it is that we're going to
00:09:51
see— and it relates back to the
earlier question of all these different brands— you need to
have confidence in our brand.
00:09:57
And while these other fraud or
scandals are going on here or there, you need to have
confidence in us. And so there's
00:10:04
more and more marketing effort
that's going behind trying to create a brand,
00:10:08
and in particular just
the trust that people have. Well, and doesn't, then, cryptocurrency
gain a level of security by
00:10:17
being connected with financial
institutions, which in many cases are relied upon by the
public in general? Those
00:10:24
institutions are basically
bridging a gap along the way. - They do.
- Which is so ironic,
00:10:28
because part of
the reason for the cryptocurrency is to decouple
from the financial institutions.
00:10:34
So there's that irony that's
there as well. Where do you want to
take this research?
00:10:39
Where do you
think are— are the next areas that need to be
investigated? So it's so funny. We just came
from the meeting where we were
00:10:45
going over, where do we want to
be taking this? And one of the things that we're thinking about
is the crypto creep. That more
00:10:53
and more people starting to use
it, we're going to— and we're trying to track and predict retail
acceptance. You know, you
00:11:01
mentioned some places starting
to take it. We at Wharton took— you know, you could pay for a
course in crypto. - Oh, really?
00:11:09
And so we did that. And you see it, you know—
movie theaters are accepting crypto. We'll see it in all
sorts of different stores. And
00:11:17
so, can we anticipate which
stores are going to end up taking it? And that
distribution and what types of
00:11:24
stores is one of the next things
that we're going to be looking at. And which types of people.
So we have looked at who— what
00:11:31
types of people are the most
likely to own crypto right now, and sort of seeing where that
diffuses. An interesting finding
00:11:39
that we see— and if I— I should
quiz you, because I'm a professor, and what do I do as a
professor? Do the East Coast,
00:11:48
West Coast, or in the Midwest,
own more crypto? Oh yeah, I'm gonna say
West Coast. - Okay.
00:11:55
you're wrong. - Okay. And if your
next guest was East Coast, you're wrong. It's—
- Really?
00:12:00
It's—
- Midwest. And that was most surprising to us. And part of
that is, they are opposed to that
00:12:07
centralized control. - Oh, yeah. And when you— and
when you pause and think about it that way. - Yeah.
00:12:12
So that's another way of, you know, can we anticipate and predict
who are going to be the people
00:12:16
most likely to be investing in
crypto? John, what's still
piquing your interest?
00:12:20
So obviously this is a very, very
complex topic. And I think every one of us is really trying to
feel the elephant. And I think
00:12:29
this is really at the very
beginning stage of our research on the cryptocurrency. I think
that the bite we are taking
00:12:36
essentially not only look at the
consumer confidence, what are the determinants of the consumer
confidence in Bitcoin, and whether
00:12:43
or not the confidence index will
predict the Bitcoin price changes, and— so we can predict
where they're going, and so on,
00:12:50
so forth. Most important, that
this whole idea of distributed trust is really new. I think a
personal trust, we know what
00:12:58
depends on. - Sure.
- And— but for distributed trust,
for instance, we don't know. And so that's
why, in fact, that a lot of
00:13:04
research we can do in terms of
figuring out, and what are the determinants of distributed
trust, and that's definitely one
00:13:13
big topic. And what's most
important, from a pricing point of view, of course, that we want to
know what the underlines the
00:13:19
changes in prices? Is there any
way that we can get a hold of the price changes in some way
and then predict how they would
00:13:28
change? So there are a lot of
modeling and data collection and processing to do.
00:13:33
Great to have you both here with us
today. Thanks very much. Well, thank you for having us.
- Thank you so much.
00:13:37
Thank you. Great to talk to you.
Dave Reibstein, John Zhang, Wharton
Marketing Professors
00:13:41
joining us here in studio. Thank you for listening to <i>The Ripple Effect</i>.
We hope you found this episode
00:13:46
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00:13:53
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