At first blush, if you look at the news about crypto right now, things don’t look so great. “China Declares Cryptocurrency Transactions Illegal; Bitcoin Price Falls” screams the Wall Street Journal headline from yesterday. Bloomberg, citing that China news and the SEC threatening to sue cryptocurrency exchange Coinbase, called September “crypto’s grim month.” Indeed after topping $52,600 earlier this month, bitcoin is down some 20% to close to $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 as it cautiously explores a stablecoin pegged to a digital version of the yuan. (A stablecoin being a cryptocurrency pegged one-to-one to 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 $184B of 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 mean to be flip, it’s just that it’s always this with crypto. And will be for years and years and probably decades to come, until it all gets sorted out.
What do I mean by sorted out? I mean there are so many key questions to be answered. Here are only a few: Will crypto supplant money? (Or at least partially?) Are cryptocurrencies a form of exchange, or a store of value, i.e., an investment? How and when will crypto be regulated? Or is it the case as Ray Dalio suggested recently, that cryptocurrencies are doomed if they become too powerful, as governments would banish them? (More on Dalio later on.)
We will be hashing out those questions and more at our “Yahoo Finance All Markets Summit+: Crypto Investing,” this Monday, Sept. 27 from 12:00 p.m. EDT – 1:30 p.m. EDT at yahoofinance.com. (Please join us!) We have a stellar group of guests, including the likes of Kristin Smith, Blockchain Association executive director; Joseph Hall, Davis Polk Capital Markets Group partner; and Michael Sonnenshein, Grayscale Investments CEO. (Full disclosure, Grayscale is the event sponsor.)
I spoke with Sonnenshein a few days ago and asked him how business was going. The dude was upbeat, grim month notwithstanding. “Grayscale’s business — and the crypto ecosystem at large — has experienced exponential growth throughout 2021, and we’ve never been more encouraged by the maturation of the digital asset ecosystem,” he said.
Grayscale, an investment manager of crypto assets, 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 business is, later in my conversation with Sonnenshein he mentioned that Grayscale had over $40 billion under management. What? Last time I checked it was $20 billion. That’s still a far cry from a giant like BlackRock, which has $9.5 trillion under management, but the trajectory is impressive.
No doubt investor interest continues to grow. Zack Guzman, one of our anchors and a resident crypto expert, recently did a presentation in which he noted how the most searched tickers on our platform had changed over time.
Zack also put a couple 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 best, is in fact a farcical currency, or as Wikipedia notes: “Dogecoin (DOHZH-koyn, code: DOGE, symbol: Ð) is a cryptocurrency created by software engineers Billy Markus and Jackson Palmer, who decided to create a payment system as a joke, making fun of the wild speculation in cryptocurrencies at the time. Despite its satirical nature, some consider it a legitimate investment prospect. Dogecoin features the face of the Shiba Inu dog from the “Doge” meme as its logo and namesake. It was introduced on Dec. 6, 2013, and quickly developed its own online community, reaching a market capitalization of over $85 billion on May 5, 2021.
So to be clear, one of the best performing coins this year is … about nothing. That’s bananas, never mind terrifying. On the other hand, one of the top TV shows of all time, “Seinfeld,” was also famously 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, low cost, less fettered variation. As such, cryptocurrency and blockchain are a parallel universe to the legacy world of finance, soon to mirror every facet of what came before and perhaps one day to subsume it.”
If that is the case, then what are world leaders, regulators, and politicians doing about it? China, under President Xi Jinping, will no doubt continue to keep a heavy hand on all things crypto, as touched upon earlier. And there will be consequences for better or worse. Crypto entrepreneur extraordinaire, Sam Bankman-Fried, profiled recently in this Yahoo Finance piece by Roger Parloff, announced late this week that he was leaving the increasingly crypto-hostile environs of Hong Kong for the Bahamas. Who wins and who loses here, Hong Kong or Nassau? Depending on their respective governments’ objectives, they might both win. Such is the world of crypto.
As for the U.S., regulators are now scrambling to address 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 Chair Gary Gensler — who taught a class on crypto at MIT — has a number of times referred to the crypto markets as the “Wild West.” Presumably this is hinting at the need for some law and order. Guess who’s going to be the sheriff?
Which gets us back to Ray Dalio, whose comments I alluded to were from an interview the hedge fund billionaire did recently with CNBC’s Andrew Ross Sorkin, where Dalio said this about regulators and bitcoin:
“‘I think at the end of the day if it’s really successful, they will kill it and they will try to kill it. And I think they will kill it because they have ways of killing it,” Dalio told Sorkin Wednesday on CNBC’s “Squawk Box” at the SALT conference in New York.
Leaving aside the conspiratorial tone, I think Dalio may be slightly off here. I don’t think the government will kill bitcoin or crypto for a number of reasons. First, because I actually don’t think they can, certainly not globally in our digital age, i.e. this cat is not going back in the bag. Second, rather than try to “kill” it, regulators will find it more prudent to co-opt it, which third, is going to happen to one degree or another anyway.
In the meantime, what’s an investor to do?
I should point out that the headline of my aforementioned July story was in fact a question. To wit: “Should you own (maybe just a little) bitcoin?” The answer I came out with was, yes, but a small amount. Did I follow my own advice, you might ask? Yes? Have I made any money? No. In fact I am down a whopping 29.93%. This grim month certainly hasn’t helped my cause.
I’m telling my kids not to worry about it, though. The dollar amount isn’t going to hollow out anyone’s inheritance. And who knows? There’s always next month.
This article was featured in a Saturday edition of the Morning Brief on September 25, 2021. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe
Andy Serwer is editor-in-chief of Yahoo Finance. Follow him on Twitter: @serwer
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