Christine A. Parlour is the Sylvan C. Coleman chair at UC Berkeley’s Haas School of Business. She has taught investing courses for years and has recently introduced crypto into some of her courses to help students better understand this risky yet growing industry.
Christine Parlour Discusses the Crypto Market
In a recent interview, Parlour offered some thoughts on the significance of crypto and how it can potentially change the world of finance. She says:
Over time, as cryptocurrencies have increased in importance, the content of the FinTech MBA course has switched increasingly to crypto.
She says one of the big things people need to understand is that investing in crypto is not always a safe thing to do. She commented that people are often used to specific financial rules that help them remain secure in the investing world. However, she says there are no rules in the world of crypto, and investors need to remain aware of this. She says:
We are very used to investing in a safe environment. Various regulatory agencies ensure that traditional equity markets are transparent, and there are specific rules governing the trading process. This regulatory system is not fully in place for crypto, either on the corporate side or on the trading side. Everyone who participates should be aware of this… In 2021, U.S. regulators made several pushes for new rules in crypto…. Uncertainties still remain, as the market ponders whether crypto lending products are securities, how stable coins and decentralized finance should be regulated, and whether the SEC will approve a spot bitcoin ETF soon.
Parlour advises everyone looking to get involved in crypto to do their homework. She says they should research the coins they’re considering and make sure they are legit and then only spend a little at a time so that they don’t put more money than what’s necessary at risk. She says:
Investors should be very cautious and make sure that they carefully do their homework.
This sentiment is shared by Ross Gerber, CEO of a wealth and investment management firm. He says:
We recommend people allocate one percent to five percent [of a portfolio to crypto]. It’s very high risk, so it must be a long-term investment and people need to look at it like a small cap tech stock.
You Need to Be Careful…
Certified financial planner Brad Ledwith says to look at crypto from a gambler’s perspective. He says:
A lot of people walk into a casino, and they budget how much they are willing to lose. Are you willing to lose one to two percent of your entire portfolio? If so, that may be a good allocation, but it is all up to your gambling risk tolerance.
Parlour also commented that not every crypto venture will survive, and thus investors should be wary of hype and research specific companies to see if they are strong enough to last.