Zhao: To some extent, yes. But it’s not a black
and white thing.
There’s no clear definition of what a bubble is.
If an asset’s price drops more than 80%? Bitcoin
dropped more than that and then recovered.
Amazon dropped (more than 90% from the start
of 2000 into September 2001), and now they
are one of the most valuable companies in the
world. Did it go through a bubble? According to
most laymen’s definition, it probably did. For Jeff
Bezos, he would probably disagree.
What’s important is there are high fluctuations.
As long as people understand what they’re
holding, what the risks are, then that’s OK.
Q: Why are crypto prices so volatile, shooting up
and down so fast?
Zhao: For the mass consumers, the first thing
I would want them to understand is that
everything is volatile.
You have to park your value somewhere. It could
be a house, it could be stock, it could be U.S.
dollars. But all of those things fluctuate against
something else.
Crypto has high volatility because it’s a relatively
smaller market. It’s much, much smaller than
traditional assets. The larger the market value
one’s asset is, the smaller the volatility. That’s
just math.
Let’s say you look at a small coin with a total
market value of $10 million. If somebody tried
to use $1 million to buy the coin, the price is
going to go up much more than 10% because
not everybody is selling that coin. If you look at a
$100 trillion asset market, putting in $1 million is
not going to move the price at all