The coming cryptopocalypse or the future for fiat?
At last week’s CC Forum, one of the key panels often felt more like an out-of-control TV confessional than a platform for serious economic debate. Yet along the way some of the most controversial names in finance and crypto not only managed to agree, but made insightful observations that every investor should take note of. Here’s what it all means
In the UK, December is the start of pantomine season – a time when provincial theatres put on bizarre plays in which colourful characters trade gags, songs, insults and catchphrases in an attempt to excite and enchant a usually highly engaged audience. The audience is encouraged to chant things like: “Oh, yes it is!” and “Oh, no it isn't!”
If you can’t wait until panto season begins then you might want to pop along to a crypto conference or two. For in among the serious discussions is the odd session that will ascend – or descend, depending on your point of view – into something far more entertaining or ridiculous.
Here the regular contributors, many of whom are not averse to taking pot shots at each other on social media, bring their grievances and prejudices to life on the stage – and the often highly partisan audience laps it up.
Yet while it is wonderful theatre, somewhere along the way panelists manage to make fascinating and sometimes insightful points about issues as diverse as the decentralisation of the banking system or whether fiat will have a future in 20 or 30 years’ time. It’s never dull.
The CC Forum, held last week in London, more than matched its billing, with participants shouting at each other, throwing strops and even waving $100 bills around in a style reminiscent of Harry Enfield’s comedy character Loadsamoney.
Yet among the name-calling and passive-aggressive smirking, debate hit some real highs. If you want to gauge the temperature of the financial world, you can learn a lot from the tension between crypto fundamentalists and the sceptics who think digital currencies are an overblown fad.
Every pantomime has its villains and the CC Forum event featured the crypto world’s very own Dr Doom. American economist, academic and avowed crypto sceptic Nouriel Roubini (above) shot to prominence by being one of the few economists to foresee the 2008 financial crisis. His detractors argue that his default modus operandi is to predict imminent economic chaos. To which they suggest, rather like a stopped clock that will tell the right time twice a day, that he will be proved correct every decade or so. This then allows them to write him off as a cynical old grouch the rest of the time.
The red rag to Roubini’s bull are the hardcore cryptovangelists. Those who believe that one day the decentralised, independent nature of bitcoin will enable it to take a sword to the fiat currencies and surge past a valuation of, ooh, $1 million in the process. Fortunately for the audience at the CC Forum, the five panelists had a broader spectrum of views.
Fears for the world economy
After a few pleasantries and general financial-related chit-chat, Roubini was given the platform to do what he does best. Slouching back in his chair, he listed the reasons for an upcoming financial slowdown, or maybe even worse: a US/China trade war, the fallout from Brexit (which he believes will push the UK and Europe into recession), and a populist politician-fuelled backlash against notions of globalisation and the trading of goods and services. Things are looking bleak...
It is not just Dr Doom who feels this way. Former Bank of England governor Mervyn King has warned that the world is sleepwalking into a fresh economic and financial crisis that will have devastating consequences for the democratic market system.
But the jury is out on whether the world’s financial institutions are prepared for the crisis. In a speech to the International Monetary Fund in Washington, King expressed his doubts. At the CC Forum event, Roubini was more positive. “Quantitative easing helped avoid a great recession,” he said. Lessons have been learnt: “The system has worked.”
It’s a view that sparked off a debate among the panelists about the centralisation of the financial system and whether this is good or bad for the world economy. Crypto advocates argue that an explosion of cryptocurrencies, and the disparate nature of crypto more generally, can help shield investors from the worst effects of the downturn.
It was a perspective that elicited a strident response from Roubini, ironically enough with some support from Craig Wright.
If the name Craig Wright is familiar it is because, as his Wikipedia page puts it, he has publicly claimed to be the main member of the team that created bitcoin. The outspoken Australian entrepreneur, who is working on a cryptocurrency and blockchain patent empire called nChain, is a controversial figure in the crypto universe and doesn’t pull punches in expounding his belief that bitcoin is the de facto crypto standard and the only one that will ultimately thrive.
Not everyone takes him seriously, though. Sitting next to him on the stage was crypto expert Tone Vays, who was sporting a T-shirt that bore the slogan “We are all Satoshi” — a sly, and some might say pointed, reference to the pseudonym of the person/persons who developed bitcoin and authored the bitcoin white paper.
Warming to his theme, Wright ran through a list of currencies and the multitude of banks across the globe and then outlined the many ways in which people could pay for items, from AliPay through to PayPal. Roubini agreed, suggesting that the so-called “centralised financial system” is not centralised, whereas, he added, “everything in the crypto world is centralised”. Cue sneers from the panel’s crypto advocates.
Having agreed once, the odd couple then did the unthinkable and agreed for a second time.
By now the discussion had moved on the security and immutability of cryptocurrencies. Wright said that in 2020 he believes bitcoin will be seized by governments and that bitcoin miners will help them. He added that there was already a precedent in the shutting down of Liberty Reserve. State intervention in crypto would clearly be disastrous for the currency.
Roubini took the perspective to another level by predicting that a cryptopocalypse is coming. He is adamant that in years to come there won't be thousands of cryptocurrencies competing with fiat across the globe. Wright agrees with him, but that's because he thinks there is only going to be one cryptocurrency – bitcoin.
The pair were not the only contributors to express doubts about the durability of cryptocurrencies. Another panelist, Brock Pierce, an entrepreneur who is chairman of the Bitcoin Foundation, also thinks that a cryptopocalypse in on its way. He argued that, as with early internet start-ups, 99 percent of crypto projects will fail. Yet as the internet gave us eBay, Amazon and others, so some crypto projects will emerge and become highly influential. “I encourage Craig Wright to continue to innovate because we don’t know where the answer will come from,” he said. Wright dutifully smiled.
The future for hard assets and fiat
Yet just as the panelists demonstrated that they could engage in reasoned and sensible debate, there was a confrontation reminiscent of recent spats in the UK’s Houses of Parliament. It began with a diversion into the nature of inflation, with Roubini claiming that “we don’t have a problem with inflation, except with s***coins”. Roubini loves the expression “s***coins” (as does Wright – another thing they agree on). He spat it out several times during the session.
This inflamed Bobby Lee, founder and CEO of Ballet, and a man whose stated mission is to drive global adoption of bitcoin and cryptocurrency. Lee began waving around a $100 bill and demanded that Roubini admit that it was worth less than it had been 30 years ago. The latter’s seeming reluctance to answer meant that the panel then embarked on a bizarre conversation. Over the course of five mad minutes they talked about about how few notes from 30 years ago are still in use, whether fiat currencies will disappear (there are a few pundits who believe only the US dollar will survive), and what would happen if a person found a trunk full of 30-year-old notes in their basement. Would local banks honour them and exchange them for current currency? No one seemed to know.
Ultimately Roubini, perhaps getting a little bored by the diversion, admitted that he would rather have crypto than actual cash, before reminding the audience that the former had suffered massive falls in value.
Among all the shouting and gesturing, more measured words could be heard. Brock Pierce admitted to a “very nervous outlook” that made him a big advocate for gold and crypto. He acknowledged that the latter is still not ready for the average investor but added: “I still have great hope it will innovate and make things easier for the average consumer, but I too am a big fan of hard assets and not a fan of stocks and bonds.” It is a view that chimes with the crypto hardcore, but other traders might have issues with it.
So what can the investor learn from all this bluster? Might it be that no one can really know the future, and that you choose your hero and your villain and follow them through to the big finale?
Whichever is true, one thing is for sure – the crypto conference world is a really entertaining place. Don't miss it next time the show comes to your town.