Crypto Breakdown; Crypto Regulation

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Bitcoin has crashed from its highs.  Ironically, one of the things it will need to rebuild value is some ground rules.  I have maintained that the markets for crypto are not liquid and they are small.  It doesn’t matter to me if you put the word billions behind it, what matters is how pervasive something is in the general public.

Crypto isn’t there yet.

Part of the problem is that there are no real killer apps.  You can’t use it for anything useful yet.  Even primitive bitcoin payment or money transfer apps are superseded by similar apps that can do the same thing with fiat currency.

My initial hypothesis was that bitcoin might be really great in a supply chain.  I was watching a video on how they make Parmigiano-Reggiano cheese in Italy, and they already use a centralized system.  Does it benefit them to transfer to a blockchain system?  Probably not worth the marginal cost.  Put another way; if we had a blockchain system to monitor romaine lettuce, would the ecoli problem that recently happened have been averted.  Hard to make the case that it would.

I think in supply chains, the power of crypto could be taking disparate parties that have no reason to trust each other to coordinate production efficiently.  Elimination of the legal contracts and other barriers to doing business is where crypto could make its mark.  I would suggest watching this video to really delve into what I am thinking about.

When the internet happened, the regulatory issues were basically already solved.  In the ensuing bust between 1999-2001, it was because the market got ahead of itself not because the government issued new regulation.

The crypto bust has been mostly because the market got way ahead of itself.  The fact the SEC/CFTC is starting to look at regulation doesn’t have a huge effect.  If anyone thought the entire marketplace was on the level, they were dreaming.

I don’t think crypto gets large scale adoption without a little regulation.  Institutional capital can access the market if there is regulation and the SEC deems the water temperature just right.  Right now, they sit on the sidelines and explore.  When the institutional capital gets involved, big business can get involved.  That’s when the magic might happen.

On Thursday, we are hosting an interactive panel discussion on regulation at the University Club of Chicago.  While the panelists will talk and make points, if you attend it’s highly likely you will get your questions answered.  If you’d like to attend, simply call the club at 312-696-2222 and make a reservation.  It’s from 5:30-7PM and I think it will be great.  We have the largest trader of crypto on the panel along with the CFTC and SEC.  Professor John McGinnis of Northwestern School of Law is moderating.  The cost is $35 for non-members of the club, and the networking should be pretty good as well.  There will be some drinks and snacks.  You are going to have to wear slacks and a sport coat.  No jeans.  Shine your shoes.