A Hong Kong building advertisement for beleaguered Bitcoin, dogged by scams, scandals and disbelief, which has fallen in value by more than 70% since its high in November 2021. A year ago Crypto exchange Bittrex was fined $24 million by U.S. regulators for helping clients evade sanctions on Syria, Iran and other hostile countries. (Kin Cheung, Associated Press file/The Minnesota Star Tribune)

Marc McIntosh (left), a finance professor at Augsburg University and former Wall Street investment banker, is skeptical about crypto other than as a possible portfolio hedge. (Courtnay Perry/Augsburg University 2018/The Minnesota Star Tribune)

Cryptocurrency is earning a bad name for good reasons lately.

The value of Bitcoin, the public-market face of the largely unregulated cryptocurrency industry, lost two-thirds of its value over the last year, compared to 25% for the S&P 500. That said, hot-to-not Bitcoin was a much better investment over five years.

The Federal Trade Commission just reported that cryptocurrency, although yet a mainstream payment method, is "an alarmingly common method for scammers to get peoples' money. Since the start of 2021, more than 46,000 people have reported losing over $1 billion in crypto to scams; about one out of every four dollars reported lost, more than any other payment method."

There's no central regulator to flag suspicious transactions and no way to reverse a transaction. Most don't understand crypto and are easy prey for online scammers.

We're inundated with pitches from Super Bowl ads to Hollywood celebrities. Kim Kardashian recently paid $1.26 million in penalties and disgorgement for touting a crypto-asset security without disclosing that she was paid $250,000 for a post on Instagram about EMAX tokens, a cryptocurrency.

SEC Commission Chair Gary Gensler has called the crypto market the "Wild West."

The Financial Stability Oversight Council, in a report this month ordered by Treasury Secretary Janet Yellen, concluded that "crypto-asset activities could pose risks to the stability of the U.S. financial system'' if their interconnections with the traditional financial system and size continue to grow "without adherence to … appropriate regulation,"

"Many crypto-asset activities lack basic risk controls to protect against run risk or to help ensure that leverage is not excessive," the council found. "Crypto-asset prices appear to be primarily driven by speculation."

Yellen and Warren Buffett, considered America's greatest long-term investor, as well as JP Morgan Chase CEO Jamie Dimon and others, have raised concerns.

"Who am I to argue with Warren Buffett?'' said Marc McIntosh, professor of finance at Augsburg University and a former Wall Street investment banker. "It's obvious that cryptocurrency is a very risky investment and there is tremendous uncertainty as to its viability as a dollar substitute."

But it may have potential when investors need a "potential store of value" like gold to withstand extreme economic events, he said.

"Can crypto act as a hedge against negative stock market movements? Possibly, but we need a lot more historical data about how crypto moves vis-à-vis the overall stock market," McIntosh said.

The council recommended rulemaking authority for federal financial regulators, legislation regarding risks posed by "stable coins," whose value is tied to currency, commodities or other financial instruments, and further study of the industry.

"Crypto hasn't changed since the Great Recession of 2008 and the cyber punks who started it because they didn't trust traditional financial institutions," said Vivian Fang, a professor at the University of Minnesota Carlson School of Management. "Bitcoin is high risk. It's volatile and doesn't generate cash flow. But there has been widening adoption, including Google, intending to use Coinbase for processing crypto payments, as well as investors.''

Bitcoin was up about 240% to 40% for the S&P 500 over five years.

"The correlation in the price movement of cryptocurrencies [and stocks] has increased since March 2020," Fang said. "There was a jump. Before 2020 it was near zero. We injected so much liquidity into the economy. That told investors it's OK to trade risky assets, including high-growth stocks. They all shot up. They now are coming down in parallel moves. If the stock market goes down, crypto goes down.''

There's other fallout, including significant environmental downsides.

The cryptocurrency swoon recently bankrupted Compute North, an Eden Prairie-based cryptocurrency "miner." Compute North had raised $385 million in capital this year, boasts $500 million in assets and owns data centers in Nebraska, Texas and South Dakota.

Crypto miners are controversial because they consume huge amounts of energy to produce cryptocurrency, an electronic asset based on mathematical computations whose primary purpose so far seems to be speculation.

A new crypto mining operation in Jamestown, N.D., will use twice as much energy as the entire city of 16,000. The Jamestown operation immediately ranked as the second-largest customer of Minnesota-based Otter Tail Power Co.

And there's related fallout among neighbors of the noisy, energy-sucking mines.

"I think it's risky but there is value," Fang added. "Most crypto stocks don't generate cash flow and its hard to calculate value. That attracts speculators. The [regulators] are fighting over what to do and President Biden [ordered] regulators to come up with a framework for regulating digital assets. That's not a sign of a dying industry."