Last week I had the pleasure of attending CoinDesk’s Consensus: Invest conference, which provided a crash course in crypto currency investing for institutional investors. (Unlike previous crypto-centered conferences, Consensus: Invest drew a number of reputable Wall Street firms interested in adding crypto to their investment offerings.) For years, there has been conversation about the viability of crypto, but the take away from the conference is that crypto is here to stay, the crypto has a bright future, not despite the asset’s recent price plunge, but because of it.
According to several speakers at Consensus: Invest, crypto’s recent travails have triggered an exodus of “crypto day traders/miners” which is paving the way for a more stable crypto ecosystem. Somewhere between 600,000 and 800,000 crypto miners have shut down with most going bust due to outdated technology and the astronomical costs of upgrading systems—especially given the current Hashrate. This shakeout has removed excess capacity from the crypto system, strengthening it for the future. As such, many crypto experts at the conference see the market’s recent downturn as an inevitable and beneficial purge, rather than a freefall. Their message: for those who think the current downturn of the crypto market is the beginning of the end, prepare to be wrong.
I was fortunate to interview several of the conference’s keynote speakers for my show. They are leaders in the crypto industry who are effectuating tremendous change, and speaking with them was informative. Given the ever-changing state of the crypto market, it is difficult to put into perspective how quickly things are moving in the crypto space and how developments in the cryptocurrency market stand to transform our financial system in the not-too-distant future.
Of the many conversations I had at Consensus: Invest, the most interesting was with Nolan Bauerle, director of research at CoinDesk, and someone who changed my view on the entire system. Nolan visited my recording studio at Carpenter Group in the Financial District the day after the event to discuss all things crypto—from its origin to its future. One point that stood out was that although crypto and blockchain are separated as it relates to its use case, the adoption of blockchain is changing as traditional financial institutions tie crypto assets to it. Nolan also explained that everything from smart contracts, tokenization and the distributed ledger of blockchain requires a related crypto asset to kindle full adoption. In other words, without crypto, blockchain may not reach its full potential. This contradicts what I often hear from investors, who posit that blockchain is where the true value lies and that crypto just happens to be an asset leveraging the power of blockchain.
From my perspective, both sides are correct. Crypto needs blockchain, just as much blockchain needs crypto to exist. For investors, crypto holds the key to true blockchain understanding and utilization. This is fascinating since so many investors overlook crypto as they wait to see the real use-case of blockchain. Nolan predicts these investors need to shift their view of asset classes and cryptographic keys for a true understanding/use case of blockchain.
Another refrain from the conference was that the financial sector missed out on many of the opportunities presented by the internet, at least early on, but that it will not make the same mistake with crypto. One proof point: The New York Stock Exchange is beginning to get a grasp on crypto, addressing the need by launching BAKKT, a global cryptocurrency platform and network that will allow consumers and institutions to buy, sell, store and spend digital assets.
Meanwhile, governments are becoming more educated about and interested in cryptocurrencies. On that topic, Caitlin Long, a blockchain and bitcoin expert, previewed upcoming crypto regulation by the state of Wyoming, which is seeking to protect blockchain businesses to bring more tax revenue from crypto companies into the state. (You can learn more about Wyoming’s plans here.) Even with increased interest in the financial and public sectors, it will still take 15 to 18 months before we see real adoption of blockchain/cryptocurrency from Wall Street due to the limitations of our current technology infrastructure for financial systems, according to Long.
You can listen to my interviews from the conference from the player below: