00:00:00
John Zhang: I definitely
agree with that. I think that—
00:00:03
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
00:00:10
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
00:00:16
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
00:00:22
cryptocurrency. Once those
things happens, I think that
00:00:25
you're going to see that the
market potential is huge.
00:00:28
Dan Loney: What's the—
what's, then,
00:00:29
the key driver, then, to
start to see that occur, do you
00:00:32
think?
- Well,
00:00:33
I think that— number one, that you
have these young people who are
00:00:37
very enthusiastic about the
cryptocurrency, and these are
00:00:42
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
00:00:48
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
00:00:57
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
00:01:03
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
00:01:11
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
00:01:18
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,
00:01:28
Dan Loney, and in each episode,
we'll be diving deep into the
00:01:31
inspiration behind the
groundbreaking research that
00:01:34
Wharton professors have
conducted, and exploring how
00:01:37
their findings resonate with the
world today.
00:01:40
- How then, do
00:01:42
some of the instances of fraud
in and around cryptocurrency
00:01:47
factor into the perceptions of
the public, and then potentially
00:01:52
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
00:02:00
think would move people away
from it.
00:02:02
Dave Reibstein: So you would think,
whenever
00:02:03
there's— you know, any hint of
00:02:05
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
00:02:12
crash the market. I actually
have been surprised how
00:02:15
resilient the market is. That
there's been these sort of
00:02:19
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
00:02:27
says people believe in this
overall concept more than, you
00:02:31
know, this individual or that
particular individual. It hasn't
00:02:34
affected the overall industry.
Well,
00:02:36
Well, that's the interesting thing as
well, is that we've seen this
00:02:38
absolute surge in pricing,
especially around Bitcoin, in
00:02:43
the wake of, you know, FTX and
all these concerns. Obviously
00:02:47
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
00:02:53
close advocate of cryptocurrency
now. So it is reactive to a lot
00:02:58
of different factors.
00:03:00
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
00:03:07
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
00:03:15
instance. You have scandals
here and there, and you
00:03:17
basically have the dirty
money. You have the tended
00:03:21
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
00:03:29
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
00:03:35
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
00:03:41
that— I would imagine that going
forward, and— the market can
00:03:46
easily absorb a lot of other
scandals. - Dave?
00:03:49
On a small scale, that's totally
true. I mean, we haven't seen
00:03:53
anything big that's going to
happen.
00:03:56
And I think it's pretty
resilient.
00:03:58
- It's hard to have a big one.
00:04:00
I think it is to have a big
one, simply
00:04:01
because the market is so
distributed and so many people
00:04:04
actually hold the
cryptocurrency. And not only
00:04:08
that, in fact, it's very
difficult for any institution to
00:04:12
unilaterally change anything in
the marketplace. I think, given
00:04:16
that, I would imagine going
forward, that the scandal
00:04:19
probably have a less and less
impact in the market.
00:04:22
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?
00:04:29
- Exactly. Yeah.
00:04:30
- 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
00:04:36
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
00:04:45
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
00:04:52
number of people to— to the
currency.
00:04:54
How do you think
that impacts
00:04:56
finance in general,
then, potentially?
00:04:58
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
00:05:04
cryptocurrency in kind of the
investing landscape?
00:05:07
Dan, there's no question what we see,
some of the major banks are
00:05:10
investing in cryptocurrency,
just to, you know, balance their
00:05:14
portfolio. And so we're going to
see this distributed
00:05:19
amongst the institutions. It was
supposed to be this non-
00:05:21
institutional entity. And now,
the institutions are really
00:05:25
investing in it.
00:05:27
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
00:05:34
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
00:05:40
their money into the
cryptocurrency. You don't see
00:05:43
the sort of sovereignty funds
for some of the countries,
00:05:47
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
00:05:53
market potential is huge.
00:05:54
What's the— what's, then, the key
driver then to start to see that
00:05:58
occur, do you think?
- Well,
00:06:00
I think that number one, that you
have these young people who are
00:06:04
very enthusiastic about the
cryptocurrency, and these are
00:06:08
the future of the country,
right? So you never bet against
00:06:12
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
00:06:19
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
00:06:27
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
00:06:35
of a certain regulatory
environment, you can imagine the
00:06:38
institutions will see the
potential and they will jump in.
00:06:41
Once they all start to jump in, of
course, that— I think that we
00:06:45
have a really bright future
there. - Dave?
00:06:48
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
00:06:55
individually, owning them,
00:06:57
it's going to be hard
for it to falter.
00:06:59
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
00:07:08
around cryptocurrency? Is it
going to be through 401ks and
00:07:14
different accounts? Is it going
to be individual? Where is the
00:07:18
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.
00:07:25
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
00:07:33
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
00:07:40
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
00:07:46
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
00:07:57
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
00:08:04
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
00:08:12
crypto, and I want to invest
00:08:14
in crypto, just as
I would any other stock.
00:08:17
Well— so it's interesting,
because you've seen different
00:08:20
companies kind of dip their toe
in the cryptocurrency water, in
00:08:23
that— in that realm of accepting
cryptocurrency, you know, for
00:08:28
payment on different services.
Which is an interesting pattern,
00:08:31
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
00:08:37
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.
00:08:43
Absolutely. I think that if you
feel really optimistic about the
00:08:48
future, there probably is
something that you want to do,
00:08:51
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
00:08:58
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
00:09:05
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
00:09:14
cryptocurrencies. The reason is
because they all use more or
00:09:17
less the same kind of a
technology, right? So they all
00:09:20
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
00:09:27
huge difference in terms of
whether or not— and the whole
00:09:30
industry is going to consolidate
on you, versus somebody else.
00:09:34
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
00:09:39
one of the industries that
invest a lot in advertising is
00:09:43
actually financial institutions.
And why? Well, I want you to
00:09:48
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
00:09:53
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
00:10:00
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
00:10:07
create a brand,
00:10:08
and in particular just
the trust that people have.
00:10:11
Well, and doesn't, then, cryptocurrency
gain a level of security by
00:10:17
being connected with financial
institutions, which in many
00:10:20
cases are relied upon by the
public in general? Those
00:10:24
institutions are basically
bridging a gap along the way.
00:10:27
- They do.
- Which is so ironic,
00:10:28
because part of
the reason for the
00:10:29
cryptocurrency is to decouple
from the financial institutions.
00:10:34
So there's that irony that's
there as well.
00:10:37
Where do you want to
take this research?
00:10:39
Where do you
think are— are the
00:10:40
next areas that need to be
investigated?
00:10:43
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
00:10:49
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
00:10:57
to track and predict retail
acceptance. You know, you
00:11:01
mentioned some places starting
to take it. We at Wharton took—
00:11:05
you know, you could pay for a
course in crypto. - Oh, really?
00:11:09
And so we did that.
00:11:11
And you see it, you know—
movie theaters are accepting
00:11:14
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
00:11:20
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.
00:11:26
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,
00:11:36
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
00:11:43
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?
00:11:51
Oh yeah, I'm gonna say
West Coast. - Okay.
00:11:55
you're wrong. - Okay.
00:11:57
And if your
next guest was East Coast,
00:11:59
you're wrong. It's—
- Really?
00:12:00
It's—
- Midwest.
00:12:02
And that was most
00:12:02
surprising to us. And part of
that is, they are opposed to that
00:12:07
centralized control. - Oh, yeah.
00:12:09
And when you— and
when you pause and
00:12:10
think about it that way. - Yeah.
00:12:12
So that's another way of, you know,
00:12:13
can we anticipate and predict
who are going to be the people
00:12:16
most likely to be investing in
crypto?
00:12:18
John, what's still
piquing your interest?
00:12:20
So obviously this is a very, very
complex topic. And I think every
00:12:24
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
00:12:32
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
00:12:39
determinants of the consumer
confidence in Bitcoin, and whether
00:12:43
or not the confidence index will
predict the Bitcoin price
00:12:47
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
00:12:55
trust is really new. I think a
personal trust, we know what
00:12:58
depends on. - Sure.
- And—
00:12:59
but for distributed trust,
for instance,
00:13:01
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
00:13:08
determinants of distributed
trust, and that's definitely one
00:13:13
big topic. And what's most
important, from a pricing point of
00:13:16
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
00:13:24
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
00:13:31
processing to do.
00:13:33
Great to have you both here with us
today. Thanks very much.
00:13:35
Well, thank you for having us.
- Thank you so much.
00:13:37
Thank you. Great to talk to you.
Dave Reibstein,
00:13:39
John Zhang, Wharton
Marketing Professors
00:13:41
joining us here in studio.
00:13:42
Thank you for listening
00:13:43
to <i>The Ripple Effect</i>.
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00:13:46
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00:13:49
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