1 comment to The Moving Target of Cryptocurrency

• Richard Portes

  May 18, 2022 at 1:25 pm · Reply

  Interesting interview. A few remarks:
  It’s easy, quick, and cheap to move funds electronically now. Going through blockchain is none of these. Yes, it avoids intermediation by banks. But the only transactors who really want that are either those who don’t want to leave traces (although all DLT transactions are recorded) – we know who they are – or who share the extreme libertarian views of some crypto proponents who don’t want anyone observing their transactions as a matter of principle.
  Whit asserts that DLT/blockchain has ‘huge fundamental value’ – that there are ‘fundamental opportunities’. What are they? So far, this is a technology that is still in search of any useful application that cannot be duplicated by the ‘traditional’ financial system – it’s a solution in search of a problem. It would be helpful if Whit could provide an example or two of problems DLT could solve better than what we have.
  Whit says that stable coins are backed by short-term dollar assets. Tether’s end-2021 financial statements show that $24 b of the then $78 b assets were in CP, much of it not top-rated, and about 40% with maturity > 90 days. Not backing like cash or Treasuries…And that’s because Tether wants to make a profit.
  The explanation of the crypto decline of the past 6 months was incomplete. Yes, there has been some switch out of crypto to seek higher yields elsewhere, as rates have gone up. But the move in rates has also brought a broad ‘risk-off’ investor mentality, which we see clearly in equity markets. That too has been a motive for exiting crypto.
  ‘A lot of people [crypto holders] aren’t taking losses.’ The majority of Bitcoin was purchased and held before autumn 2021, much of it at prices well above its current value ($29,055 as I write – down 3.77% today so far). And then there are those who bought TerraUSD, now trading at $0.10, or who had Luna, now valued at 0, give or take a fraction of a cent.
  The El Salvador story would be amusing if it weren’t so sad for the country and its population.