Commentary: Crypto is going mainstream, which means it’s over
NEW YORK: Two big things have happened in the crypto world this month: A public validation and a semi-private snub. Both of them bode poorly for its future.
The official validation came in the form of the US Securities and Exchange Commission (SEC) approval of a bitcoin exchange traded fund (ETF), which will make it easier for speculators to invest in Bitcoin. The slight came at this year’s World Economic Forum, which I attended, and where Bitcoin - or any cryptocurrency, really - was clearly on the outs.
Last year crypto was everywhere in Davos. This year, the star of the show was artificial intelligence. Crypto, like me, didn’t even know about all the really good parties, much less get an invitation.
These may seem like contradictory developments: On the one hand, a Bitcoin ETF legitimises crypto as an asset class. On the other, the annual jamboree of the elite establishment has all but banished the crypto community.
Yet both are indicative of the fact that, as an asset class, crypto has gone fully mainstream - which means it has peaked.
To be fair, crypto has defied expectations thus far. Its price soared even though it was never clear what its value was. As Eugene Fama, the father of modern finance, recently said: “Unless it becomes a widely used medium of exchange, bitcoin should eventually implode. The alternative is that all I learned from monetary theory about how currencies acquire value is meaningless.”
He has a point. Cryptocurrencies don’t pay dividends, and a currency that is not backed by a government has no intrinsic value, because it has no claim on real assets.
The technology may have worth as a way to facilitate payments. But that is not enough to justify its current value.
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