At first glance, if you look at the news about crypto now, it doesn’t look that great. “China declares cryptocurrency transactions illegal; Bitcoin Price Falls” screams the headline of the Wall Street Journal From yesterday. Bloomberg, citing the Chinese news and the SEC threatens to sue cryptocurrency exchange Coinbase, called September “the grim month of cryptography”. Indeed, after surpassing $52,600 earlier this month, bitcoin is down about 20% to nearly $43,000.
And that’s all true, as far as it goes. Until you consider that China has long pushed back against all things crypto – even if it is cautiously a stablecoin linked to a digital version of the yuan. (A stablecoin is a cryptocurrency that is pegged one-to-one with a relatively stable asset such as the dollar, gold or in this case the yuan.)
And there are the other recent headlines, like this one from CNBC: “You can now get paid in bitcoin to use Twitter,” or this CoinDesk story “Crypto Industry Could Add $184 Billion in Economic Value to India by 2030: NASSCOM.” Or this one from the Wall Street Journal, “Switzerland Gives Green Light to Crypto Trading Exchange.”
So which one is it? Crypto Thumbs Up or Thumbs Down? Is crypto at some sort of crossroads? Yes, yes and no. I don’t want to be lame, it’s just like that with crypto. And that will take years and years and probably decades more until it is all resolved.
What do I mean by regular? I mean, there are so many important questions that need to be answered. Here are just a few: Will crypto displace money? (Or at least in part?) Are cryptocurrencies a form of exchange, or a store of value, ie an investment? How and when is crypto regulated? Or is it, as Ray Dalio recently suggested, that cryptocurrencies are doomed to fail if they become too powerful because governments would ban them? (More on Dalio later.)
We’ll answer those questions and more at our “Yahoo Finance All Markets Summit+: Crypto Investing,” coming Monday, September 27 from 12 noon EDT – 1:30 PM EDT on yahoofinance.com. (Please join us!) We have an amazing group of guests, including Kristin Smith, Executive Director of the Blockchain Association; Joseph Hall, partner of Davis Polk Capital Markets Group; and Michael Sonnenshein, CEO of Grayscale Investments. (Full disclosure, Grayscale is the event sponsor.)
I spoke to Sonnenshein a few days ago and asked him how things were going. The fellow was cheerful, despite the grim month. “Grayscale’s business – and the crypto ecosystem in general – has grown exponentially in 2021 and we have never been more encouraged by the maturation of the digital asset ecosystem,” he said.
Grayscale, a crypto asset investment manager, is owned by DCG, Digital Currency Group, a crypto holding company founded by now billionaire Barry Silbert. Speaking of billions, and just to give you an idea of how crazy this company is, later in my conversation with Sonnenshein, he said Grayscale had over $40 billion under management. What? Last time I checked it was $20 billion. That’s still a long way from a giant like BlackRock, which has… $9.5 trillion under management, but the trajectory is impressive.
Undoubtedly, investor interest continues to grow. Zack Guzman, one of our anchors and a resident crypto expert, recently did a presentation noting how the most searched for tickers on our platform had changed over time.
Zack also put a number of quizzes in this deck, including this one:
The answers to the quiz are instructive in a number of ways, including the point that Dogecoin (DOGE-USD), which performed the best, is in fact a farcical currency, or as Wikipedia notes: “Dogecoin (DOHZH-koyn, code: DOGE, symbol: NS) is a cryptocurrency created by software engineers Billy Markus and Jackson Palmer, who decided to jokingly create a payment system, mocking the wild speculation in cryptocurrencies at the time. Despite its satirical nature, some consider it a legitimate investment perspective. Dogecoin has the face of the Shiba Inu dog from the “Doge” meme as its logo and namesake. Launched on December 6, 2013, it quickly developed its own online community, with a market cap of over $85 billion as of May 5, 2021.
So just to be clear, one of this year’s best performing coins is about nothing. Those are bananas, let alone terrifying. On the other hand, one of the greatest TV shows of all time, “Seinfeld,” was also about nothing.
I last wrote about crypto in July, where I posited “bitcoin (BTC-USD) and its ilk are to money what the internet is to information – a digital, cheap, less chained variant. As such, cryptocurrency and blockchain are a parallel universe to the legacy world of finance, soon to reflect every facet of what preceded it and maybe one day to accommodate it.
If so, what are world leaders, regulators and politicians doing about it? China, under President Xi Jinping, will no doubt continue to take a hard line on all things crypto, as mentioned earlier. And there will be consequences for better or worse. Crypto entrepreneur extraordinaire, Sam Bankman-Fried, recently profiled in this Yahoo Finance piece by Roger Parloff, announced late this week that he leaving Hong Kong’s increasingly crypto-hostile environment for the Bahamas. Who wins and who loses here, Hong Kong or Nassau? Depending on the objectives of their respective governments, they can both win. That is the world of crypto.
As for the US, regulators are now scrambling to tackle at least some facets of crypto, which is welcomed by many in this world. The focus, according to The New York Times, is now on stablecoins. SEC chairman Gary Gensler — who? taught crypto at MIT – has referred to the crypto markets as the ‘wild west’ a number of times. Presumably this indicates the need for some law and order. Guess who’s gonna be the sheriff?
Which brings us back to Ray Dalio, whose comments I referenced an interview the hedge fund billionaire did recently with Andrew Ross Sorkin of CNBC, where Dalio said this about regulators and bitcoin:
“I think if it’s really successful, eventually they’ll kill it and try to kill it. And I think they’ll kill it because they have ways to kill it,” Dalio told Sorkin on CNBC’s “Squawk Box” at the SALT conference in New York on Wednesday.
Aside from the conspiratorial tone, I think Dalio might be a little off. I don’t think the government will kill bitcoin or crypto for any number of reasons. Firstly because I don’t actually think they can, especially not globally in our digital age, ie this cat is not going back in the bag. Second, rather than trying to “kill” it, regulators will find it wiser to co-opt it, which thirdly will happen to some degree anyway.
What should an investor do in the meantime?
I should point out that the headline of my aforementioned July story was in fact a question. Namely, “should you own (maybe a little) bitcoin?” The answer I got was, yes, but a small amount. Did I take my own advice, you may ask? Yes? Did I make money? New. In fact, I lost a whopping 29.93%. This grim month has certainly not helped my case.
But I tell my kids not to worry about it. The dollar amount will not erode anyone’s legacy. And who knows? There is always next month.
This article was featured in a Saturday edition of the Morning Brief on September 25, 2021. Get the Morning Brief straight to your inbox every Monday through Friday before 6:30 a.m. ET. Subscribe
Andy Serwer is editor-in-chief of Yahoo Finance. Follow him on Twitter: @server
Read the latest financial and business news from Yahoo Finance
Read the latest cryptocurrency and bitcoin news from Yahoo Finance