Exploring the transformation of value in the digital age By Michael J. Casey, Chief Content Officer Was this newsletter forwarded to you? Sign up here. |
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Talk about a study in contrasts! On the one hand, we had the Consensus Festival in Austin, TX last week – a rollicking, four-day affair that took in more than 20,500 people from 105 different countries, with more than 600 speakers on 23 stages and a huge selection of parties and different experiences hosted both by CoinDesk and third-party operators. As the host of the event, I’m biased, but I feel confident saying this was the most important crypto gathering in history. The mood was upbeat, determined and forward-looking. On the other hand, we had dark news from crypto markets, which were sent into a tailspin Sunday night as crypto lender Celsius confirmed people’s suspicions about its financial health by suspending customer withdrawals. Today’s column is on the lessons we must learn as an industry from asking tough questions of the leaders of such firms. I didn’t read the Consensus positive vibes as naive or pollyannaish. Rather, it reflected the opportunity we now have to ignore the distraction of rampant market speculation and get on with the job of developing this technology while also figuring out the business and policy framework it needs to thrive. This was the tone in our "Money Reimagined" podcast episode this week, which addressed a surprisingly constructive research paper on crypto from the Bretton Woods Committee, a body aligned with the International Monetary Fund that’s considered part of the financial establishment. If you don’t believe such an outfit could take a positive view of crypto in this environment, listen to the conversation my co-host Sheila Warren and I had with William Dudley, former President of the Federal Reserve Bank of New York and now Chair of the Bretton Woods Committee, as well Deepika Sharma, of Blackrock, who co-authored the research paper. But first, read the newsletter. |
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Launched in September 2017, KuCoin is a global cryptocurrency exchange with its operational headquarters in Seychelles. As a user-oriented platform with focus on inclusiveness and community action reach, it offers over 700 digital assets, and currently provides spot trading, margin trading, P2P fiat trading, futures trading, staking, and lending to its 18 million users in 207 countries and regions. In 2022, KuCoin raised over $150 million in investments through a pre-Series B round, bringing total investments to $170 million with Round A combined, at a total valuation of $10 billion. KuCoin is currently one of the top 5 crypto exchanges according to CoinMarketCap. Forbes also named KuCoin one of the Best Crypto Exchanges in 2021. In 2022, The Ascent named KuCoin the Best Crypto App for enthusiasts. |
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FUD or facts? Terra, Celsius show value of asking questions |
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Three weeks ago – before Consensus 2022, before the Federal Reserve put the fear of God into crypto traders, before the Celsius meltdown sent bitcoin on a downward spiral toward $20,000 – I wrote a column about the challenges quantum computing poses to blockchains. Like clockwork came the cries of “FUD” from the Crypto Twitterati. FUD, for those who don’t know, stands for “fear, uncertainty and doubt.” The crypto community has long used the pejorative to describe what they see as falsehoods or exaggerations spread by opponents of cryptocurrencies and blockchain technology to scare off investors, regulators and the general public. And that’s fine, I suppose, if you’re talking about deliberate attempts to spread ill will. But the knee-jerk way in which supporters of crypto resort to the “FUD” cry and other dismissive responses to any critique or expressions of concern about the space also reveal a worrisome immaturity in this space. Too often, journalists, especially my team at CoinDesk, are targets of these responses when those reporters are simply asking the tough questions that any good media organization must ask to get to the facts. Now, with the failings of two key systemically risky enterprises - Celsius and the Terra Luna project – roiling the crypto markets, it’s my hope that people in this industry can finally appreciate the value of asking questions and finding failings. Kicking the tires on projects and holding people accountable for flaws within them is how the industry will improve and grow. That’s true, whether it’s to explore what, if anything, must be done to upgrade blockchains to post-quantum proofs or whether it’s to expose the serious, vital questions that smart analysts are asking about the viability of Terraform Labs’ UST stablecoin or Celsius’s high-yield returns. Attacking the messenger Without wanting to pile on or indulge in “told you sos,” it’s worth pointing out how, over the past three years, CoinDesk reporters have covered Terraform Labs and Celsius and the responses they’ve received. The hard-hitting coverage has been relentless, as have the efforts to dismiss our line of questioning as FUD. Here are but a couple of examples: In July 2020, former CoinDesk reporter Nate DiCamillo published a piece entitled “What Crypto Lender Celsius Isn’t Telling Its Depositors” about how the company may have been taking on “more risk than its depositors realize.” The reporter described the company’s operation in straightforward terms that made the risks clear: “Like a bank, Celsius Network borrows from one set of clients, lends to other customers and pockets the difference in interest. Unlike a bank, it only borrows and mainly lends cryptocurrency, and it does not have government deposit insurance.” Retweets of the story were met with cries of “fake news.” Celsius CEO and founder Alex Mashinsky was quoted in the piece telling a YouTube audience of “Celsians” – as the company’s users are known – “Don’t listen to the FUD-ers, look at the facts.” Mashinsky went to assure those same listeners “that the company is prudently deploying their crypto deposits,” DiCamillo wrote. FUD or prescient warning? You decide. And then there’s Terraform Labs high-profile founder Do Kwon. In December, CoinDesk selected Kwon as one of its “Most Influential" for 2021. But acknowledging a person’s influence in an industry will never preclude our journalists from asking tough questions. At that time, with Terraform Labs under investigation by the U.S. Securities and Exchange Commission and the company having taken the dramatic step of filing a lawsuit against the SEC to challenge its subpoenas, our CoinDesk TV “First Mover” anchor Christine Lee asked Do Kwon for his thoughts on the U.S. regulatory situation. His response was surprising, given the situation: “In the U.S.? I have very little interest.” When Lee pressed him, Kwon claimed that because he was of Asian descent he had an interest in global affairs and wasn’t “obsessed with American policies and American regulations.” What ensued after that was a Twitter attack against Lee, in which Kwon stirred up a horde of “LUNAtics”against her. A few brave souls sprung to her defense, including one who pointed out that Kwon’s “I’m Asian” defense – as if he was indifferent to regulatory issues – was shallow, because he had not set up his company in his native South Korea but in the more lax regulatory jurisdiction of Singapore. But, of course, these defenders were immediately accused of FUD. Lessons learned The point here is that as journalists struggle to get to the truth, the people they are seeking answers from too often abuse the emotional connection their community of token holders have with their projects. They stir up the tribe to obfuscate and intimidate. It is ugly behavior and it looks bad for the industry. More importantly, this lack of appreciation for fact-finding runs counter to the antifragile ethos of open-source systems. Crypto is supposed to be constantly improving and advancing, precisely because the bugs and flaws in its code and design are exposed and are subject to discussion and debate. Out of that process comes progress. Now that the flaws of the Terra Luna and Celsius projects have been exposed in the most painful way, let’s hope the community uses this opportunity for some of its own introspection. Let’s assign “FUD” to the dustbin of history. |
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Off the charts: Past as prologue for bitcoin outlook? |
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The twin Celsius and Terra crises, as well as the Fed’s fight against inflation, have pushed bitcoin way down from its highs above $68,500 last year to levels just above the $19,655 high it hit in the last bull run in 2017. No one can say where it will settle with any certainty, of course, but it’s possibly useful to look back on the sharp selloff that followed that last bull run to consider what might be possible this time. The two charts above might help. If we think that prior selloff presents the limits of how far things can fall in total, this isn’t great news for bitcoin bulls. Bitcoin retraced 83.64% from its December 2017 high back then. As of yesterday afternoon, it had only retraced 70.71% from its November 2021 high. Now, there are big differences between the past selloff and the current one. Most importantly, this time it isn’t a crypto-only phenomenon. Bitcoin and other cryptocurrencies have sold off in tandem with mainstream financial markets in response to fears over inflation and higher interest rates. That wasn’t the case in 2018. But this is cold comfort. It might mean bitcoin is dragged down further by continued weakness in traditional markets. Or it might mean that, if the Fed becomes less aggressive in tightening monetary policy, an improvement in broad market sentiment could play into bitcoin’s hands. The broader message, though, is that as with 2018, it will take a long time for a full recovery in price, whatever the eventual low ends up being.
Winter is here.
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The conversation: Mashinsky materializes |
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To pick up where we left off above, it’s fair to say that Celsius CEO and founder Alex Mashinsky doesn’t have quite the command over the “Celsians” he once had. After the Celsius exchange had blocked its clients’ access to their tokens, many of them are now facing massive losses. So, when Mashinsky appeared back on Twitter Wednesday – three days after he retweeted Celsius’s dramatic announcement that it was freezing withdrawals “in the interest of our community” – the reception was very different from the loyal cheerleading he once got. Following a tweet that gushed that “to see you come together is a clear sign our community is the strongest in the world,” he got an earful from some, pleas for help from others, schadenfreude from his critics, and just an occasional show of support and “trust” from some diehard hopefuls. Martin Krung, describing the tweet’s language as “blabla,” pointed to the manipulative way in which customers who’d been “held hostage” were now described as “community.” Gold bug and persistent crypto critic Peter Schiff took the opportunity to rub it in, pointing out that in a debate between them six months ago, Mashinsky had denied Celsius was achieving its high yields by taking risks with its clients’ funds. The playbook of deflection and conspiratorial thinking was not entirely abandoned by the Celsians. Someone with the Twitter handle @Evanrodts said his "anger is not at Alex & Celsius but at the short sellers” that he claimed launched “a coordinated attack to take Celsius out.” Others just prayed. “Please don’t let me down,” implored @Henry69242220, who said he “had 45 ETH [presumably deposited at Celsius] which I was saving for my new house.” He said he was “crying and praying to God that I will be able to get that money out.” And in a reply to that initial tweet, he added, “I can't even look into my wife and kids eyes right now how to explain and no words can express the feelings I have . GOD PLEASE HELP ME” |
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Relevant reads: Highlights from Consensus 2022 |
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In stark contrast to news of crypto lending crises and of gloom and doom in markets, CoinDesk’s Consensus festival was a stoic if not jovial affair, with investors, developers and even regulators shrugging off the negativity and (mostly) acknowledging that the tech is here to stay – if not nosebleed prices. The whole thing felt celebratory and collaborative, as people from different interest groups and sectors came together within what we call the industry’s annual “Big Tent” event to figure out how to resolve differences and move the tech forward. CoinDesk’s coverage of its own event captured this interesting, almost deliberate detachment from the harsh realities of markets: Cheyenne Ligon’s wrap up of the festival called it the “Crypto Bull Market’s Goodbye Party.”David Z. Morris noted that “no one is saying ‘Crypto Winter’ at Consensus." The spirit of collaboration and commitment to build for the future was perhaps most encapsulated in Nikhilesh De’s interview with Sunayna Tuteja, the chief innovation officer of none other than the Federal Reserve. Tuteja told Nik she had “upwards of five meetups with builders, engineers and investors in the space and really [took] the time to listen and learn from the ecosystem [about] what's exciting them, what they're working on and where and how the Fed can be a collaborator in advancing that innovation.” It was not all about parties and agreement. But even when there were differences, sessions were often riveting and vital. My favorite panel was the debate, moderated by Forkast News’ Angie Lau, between Willamette University Professor Rohan Grey, Circle Chief Strategy Officer Dante Disparte and Custodia Bank Founder Caitlin Long. As Jesse Hamilton reported, the argument over who should have the right to issue digital dollars – government, banks or private tech companies – got heated. |
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Take the crypto work survey |
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The latest U.S. jobs data is showing a massive shift of people in jobs, thought to be pandemic-driven, as workers seek better pay and flexibility. Technological innovations, particularly blockchain-based smart contracts, are also changing the way people earn money and organize. Together, these trends are changing the concept of work. CoinDesk is seeking your response to our survey to gain insights about the Future of Work. Help CoinDesk gain insights into the working world of crypto by filling out our easy, anonymous Crypto Work Survey by June 21. Take the survey. |
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