Florida State University Associate Professor Guangzhi Shang characterized the cryptocurrency industry as the "Wild West of the financial markets."
"And I think it's going to remain this way for at least three to five years," he said.
Shang, a cryptocurrency expert in Florida State University's College of Business, made his comments Monday as news about the collapse and bankruptcy of cryptocurrency exchange FTX continued to rattle the trillion-dollar industry. News reports also noted investigations of potential criminal misconduct at FTX.
Shang said numerous factors likely contributed to FTX's implosion, which followed the downfall of cryptocurrencies such as SpaceBIT and PayCoin.
The factors include a lack of government regulation, he said.
"I think the general idea from policymakers is that they want to be light-handed and see what this crypto space can do for the broader society," Shang said. "So, they want innovation to happen first, and if you want to be light-handed, then it's inevitable that in the process of development of this new financial technology, there will be failure stories."
Other factors include under-collateralization and an inability to quickly liquidate collateral when scores of investors suddenly want to withdraw their money.
"There are a number of forces behind the scenes that made this happen," Shang said, "and I think they're quite natural."
Risk Warning: Cryptocurrency is a unregulated virtual notoriously volatile instrument with a high level of risk. Any news, opinions, research, data, or other information contained within this website is provided for news reporting purposes as general market commentary and does not constitute investment or trading advice.
