Speculation Is Good (for Crypto)

Exploring the transformation of value in the digital age

By Michael J. Casey, Chief Content Officer

Sept. 17, 2021

If you were forwarded this newsletter and would like to receive it, sign up here.

Sponsored by

It was a busy week for the cryptocurrency industry in New York, with in-person conferences, workshops and parties filled to the brim with crypto enthusiasts. After the shutdowns of COVID-19, it had the feel of a revival. And while this was nothing like the crowds of Consensus 2018, it also felt like the continued gains in decentralized finance (DeFi) usage, non-fungible token (NFT) markets and altcoin tokens were showing up in that particular breed of hype and buzz this community tends to muster during times of speculative fervor. This week’s column explains why this is not only inevitable but, in a volatile but catalytic way, a key driver of growth.

Meanwhile, in this week’s episode of the “Money Reimagined” podcast, my co-host Sheila Warren and I conduct the second in our “OG” interview series with legendary investor Bill Tai, who began mining bitcoin in 2010 and has been an early investor in success stories such as Zoom and Canva. Tai is now helping a team called Nfinita harness the power of NFT communities to raise money for charitable causes. Nfinita’s CEO Danny Yang joined in the conversation.

Have a listen after reading the newsletter.

A message from Circle

TRON USDC now available

The world’s leading dollar digital currency on the most powerful and innovative blockchains.

Delivering on a vision for an interoperable global standard for dollar digital currency, Circle and TRON have partnered to make USD Coin (USDC) available on the TRON blockchain. TRON joins a fast-growing list of 3rd-gen blockchains that natively support USDC, including Algorand, Solana and Stellar. TRON is home to a broad ecosystem for digital assets in Asia and around the world, and the TRON community can now benefit from easy access to the world's fastest-growing, regulated dollar digital currency.

Businesses can open a free Circle Account to convert, mint and redeem USDC on TRON, plus settle incoming and outbound payments. Circle Account holders can also swap USDC across all blockchains that support the dollar digital currency and access a robust suite of APIs that support USDC for TRON.

Open a free Circle Account and access TRON USDC today

How the Crypto Hype Machine Breeds Innovation

Rachel Sun/CoinDesk

Two images prominently displayed on multiple LED screens caught my attention as I wandered New York’s Javits Center during Monday’s opening of SkyBridge Capital’s SALT conference: a sponsor board stacked with crypto companies’ logos and a promo for a talk by newly converted NFT fanatic Paris Hilton.

Juxtaposed, those images conjured a question that often arises whenever cryptocurrencies are in a bull market phase: Is the noise a sign the industry is poised for explosive, mainstream integration, or are we seeing the kind of over-hyped, celebrity-infused excess that portends an imminent collapse in crypto markets?

The more I think about it, the more I think the answer is “both.”

That might seem contradictory. So, let me try to break down why it’s not and also explain why this Wild West, boom-bust state of affairs is an unavoidable, intrinsic feature of how this industry innovates and grows.

First, let’s separately consider each state for Schrodinger’s Cat here.

On the one hand, the hyped-up presence reflects a cashed-up industry with both the financial wherewithal and the motivation to try to woo the deep-pocketed institutions attending one of the investing industry’s biggest annual conferences. Why would digital asset companies like lead sponsor NYDIG take on such a large, expensive presence at SALT if they didn’t sense a huge, growing opportunity from institutional investors?

After all, the SALT main stage, featuring multiple crypto-themed sessions, delivered story after story of hedge funds and other traditional financial institutions exploring ever more adventurous investing strategies in bitcoin, DeFi and even NFTs.

On the other hand, there was a very late-2017 feel to the crypto presence, not only with SALT’s own celebrity lineup but at numerous other sideline conferences in New York, such as the Digital Assets Summit, and at late-night parties at rooftop bars and expensive dinners. It’s hard not to worry that as NFTs and various “Eth-killer” altcoin tokens reach lofty new heights, that we’re due for a rerun of the 2018 “Crypto Winter” that followed the previous year’s initial coin offering (ICO) bubble.

Here’s the thing: it’s possible to project – and to prepare – for that selloff while still remaining strongly convinced that the frenetic investment and marketing activity is a sign of bigger, more important things to come. An amped-up money and hype machine is a fundamental driver of the self-perpetuating cycle of innovation and development that is growing and will continue to grow the crypto ecosystem.

People will lose their shirts, yes. But before then, these unfortunate buy-high-sell-low victims will have contributed to the rapid capital formation and opportunity creation that’s building the technical and social infrastructure of a new, decentralized financial system.

Continue reading this column here.

–Michael J. Casey

Off the Charts

China’s rickety real estate

While the crypto sub-economy operates in a world of its own, crypto is by no means immune from outside world shocks. One part of the global macro economy that crypto investors might want to be watching is the Chinese real estate market.

News that China Evergrande Group, the country’s second largest property company, is facing a cash crunch revives rumors that stablecoin provider Tether is exposed to the troubled Chinese real estate lender’s debt, rumors that it promptly denied. (The speculation is understandable: the company revealed in June that within the reserves it holds to back its USDT tokens one-to-one with the dollar is just under $30 billion in commercial paper. That’s a large stash: surely some if it is in Evergrande, many think.)

But the issue might not be Evergrande, but what it says about the entire, over-indebted Chinese real estate industry. Is there a crisis brewing for that industry? Check out this chart that Bloomberg pulled together with data from China’s statistics bureau. Home sales are at the lowest since the height of China’s COVID crisis.

The bigger question is whether China is a canary in the coal mine for other markets all around the world that have run up heavily in the hyper-easy monetary policy era of COVID. If so, the fallout for crypto from a correction in the world’s housing market or in emerging market debt or in fine art or in commodities might not just be felt by Tether, but by a wide range of crypto tokens that have surged along with all this asset inflation.

A message from BlockBank

Looking for a crypto wallet with DeFi and CeFi coupled with banking and debit cards? Look no further, V2 of BlockBank’s super application launches this fall, offering access to:

BlockBank has already obtained licenses for Estonian virtual currency service provider, and Australian digital currency exchange and payment service provider.

Stay updated and subscribe to the Beta testing.

The Conversation

A QAnon-Like Cult?

Illustration: Rachel Sun/CoinDesk

By now, most decent headline writers at mainstream media outlets surely have a good sense of what will or won’t trigger the crypto community. Those at The Financial Times (FT) could not have been surprised by Crypto Twitter’s response to an article by Siddharth Venkataramakrishnan and Robin Wigglesworth entitled “Inside the Cult of Crypto.”

Whether Venkataramakrishnan himself needed to go further by alluding to QAnon is another question.

Omid Malekan, an adjunct professor at Columbia University who has written favorably about Bitcoin for the FT, seized upon that reference to present Venkataramakrishnan’s essay as reductionist and defensive of the old order that crypto seeks to disrupt:

But of course, the FT’s readership spreads far beyond crypto circles. It includes people like Nicholas Weaver, a computer scientist at the University of California, Berkeley, who seemed to find some absolute (religious?) truth in the provocative piece:

And the kinds of people who write books wrongly proclaiming the “end of X”:

The responses I liked to see, however, were those who found good and bad in the piece while pointing out the absurdity of what was left unsaid. Like Noelle Acheson, now head of market insights at Genesis Trading but formerly head of research at CoinDesk:

Or Maya Zehavi, who wins the prize:

Relevant Reads

Solana Slumps

Money Reimagined

A newsletter from CoinDesk

See Previous Editions

Copyright © 2021 CoinDesk, All rights reserved.

250 Park Avenue South New York, NY 10003, USA

You can manage your preferences here or unsubscribe from all CoinDesk email.