Читать книгу Sustainable Futures - Raphael Kaplinsky - Страница 30

There are a number of structural characteristics within the financial system which have the potential to spill over into a systemic crisis. One potential source of instability in these markets is the fragility of automated trading systems.¹³ Automated trading is increasingly used to drive investments in stocks. Programmable buy–sell computer-driven systems allow for automated transactions based on algorithms designed by the programmers. This is referred to as ‘black box high frequency trading’. The share of automated trading transactions in the US rose from 15 per cent of total market volume in 2003 to 85 per cent in 2012. During the 2008 Financial Crisis, it was not uncommon for market prices to fall/rise by 5–10 per cent in a single day, largely driven by algorithmic trading. These algorithms have the potential to produce what is referred to as a ‘flash crash’. On 6 May 2010, the US Dow Jones Industrial Index fell by 9 per cent in the space of 15 minutes. This is widely believed to have resulted from unregulated automatic algorithmic trading. It is believed that the growing use of Artificial Intelligence in these systems may reduce the possibility of a flash-trading crash. Perhaps they will. However, the growing sophistication of these algorithms makes them less transparent to external intervention. If only one of these algorithms is incorrectly designed, the financial sector may easily tip into crisis.

Another possible source of disruption which is internal to the financial system is the market in cryptocurrencies such as Bitcoins. These are essentially Ponzi schemes (which are often referred to graphically as pyramid schemes). These schemes generate returns for early investors by bringing in new investors who fund the gains reaped by early entrants. However, the more investors there are in the scheme, the greater the number of new investors required to keep the system growing and to maintain the stability of the pyramid. Thus, Ponzis are inherently unstable. Moreover, because of their need for exponential growth (an ever-growing number of new investors are required to service existing investors), they have a limited life.

Unlike national currencies which are guaranteed by governments, the only value which cryptocurrencies possess is the belief that they are valuable. Their appreciation in value depends on more and more investors sharing this belief. They have no guardians, and once belief in their future value is eroded, the edifice may crumble very rapidly. Take the case of Bitcoins. The value of Bitcoin ‘currency’ has grown at an extraordinarily rapid rate – between October 2016 and October 2017 by more than 5,000 per cent. In December 2017, a Bitcoin was valued at $19,703. But its value was unstable. In early January 2019, its value had dropped to $4,057, including a fall of $1,000 in a 24-hour period. On 9 March 2020, fears of a spreading Covid-19 pandemic led to a fall of $26bn in the value of cryptocurrencies. In February 2021, the value of a Bitcoin soared to $52,000. As the financial journal Forbes warned readers, ‘Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.’¹⁴ If the Bitcoin market was small, this crazed speculation would be of little significance. In 2016, cryptocurrencies totalled less than $18bn. This rose to $129bn in 2018, and $237bn in 2019.