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Don't talk balls: cryptocurrencies are not dead

BIScom Subsection: 
Nigel Morris-Cotterill

It's almost impossible to open a website or blog with even a peripheral interest in financial matters and not see a headline saying something like "The Death of Bitcoin." Total tosh. So are the click-bait headlines in the style of "is blockchain dead?"

This is why.

Like time and tides, fads and fashion wait for no man.

For those who only heard of Bitcoin and its ilk in mid-2017, remember this: that was when #MeToo was in a two-horse race for media supremacy with the seemingly inexorable rise of the price of crypto-currencies of which Bitcoin is only one of many examples. Indeed, in the middle of 2017, speaking at a Thompson-Reuters financial sector event, I expressly told the audience that, from a financial crime perspective, Bitcoin was old hat: the risk was that because it's technologically simple to create one's own crypto-currency, the danger would mutate to private label assets that would be able to operate entirely outside the view of non-participants. The ease of such activity, without the privacy, appeared only weeks later when ICOs began to become popular, mainly using the Ethereum platform which removes almost all of the remaining technological barriers.

The people that are saying Bitcoin and its ilk are dead, or close to it, are often those who were busy pumping its price (not, I emphasise, value) at the end of 2017. Once it reached USD5,000, the bandwagon was being stoked. Those who preached caution often did so from a position of ignorance. They called Bitcoin, etc. "a scam," failing to differentiate between the product and the market.

The primary scam was in the pump and dump in the price of crypto-assets which created a bubble and the mirror image money-maker, short-selling and talking down the asset.

Crypto-currencies and related assets are not, of themselves scams. However, that is not to say that they cannot be vehicles for scams, as several ICOs have amply demonstrated.

What is true is that, as the bubble has burst, as it was always going to do, those who piled in with all manner of crypto-currency related businesses have found that their investment was essentially parasitic not on crypto-currency as such but on the bubble. And like spots of water on a fully inflated balloon, when the balloon pops, the water flies off.

And so crypto-currency exchanges, developers of wallets (who were in fact one stage even more removed than the spots of water) and those developing "FinTech" based on e.g. ATMs and card-based transfer services have seen a sudden decline in the values of holdings.