It was a busy week for the cryptocurrency industry in New York, with in-person conferences, workshops and parties filled to the brim with crypto enthusiasts. After the shutdowns of COVID-19, it had the feel of a revival. And while this was nothing like the crowds of Consensus 2018, it also felt like the continued gains in decentralized finance (DeFi) usage, non-fungible token (NFT) markets and altcoin tokens were showing up in that particular breed of hype and buzz this community tends to muster during times of speculative fervor. This week’s column explains why this is not only inevitable but, in a volatile but catalytic way, a key driver of growth.

Meanwhile, in this week’s episode of the “Money Reimagined” podcast, my co-host Sheila Warren and I conduct the second in our “OG” interview series with legendary investor Bill Tai, who began mining bitcoin in 2010 and has been an early investor in success stories such as Zoom and Canva. Tai is now helping a team called Nfinita harness the power of NFT communities to raise money for charitable causes. Nfinita’s CEO Danny Yang joined in the conversation.

Have a listen after reading the newsletter.

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Rachel Sun/CoinDesk

Two images prominently displayed on multiple LED screens caught my attention as I wandered New York’s Javits Center during Monday’s opening of SkyBridge Capital’s SALT conference: a sponsor board stacked with crypto companies’ logos and a promo for a talk by newly converted NFT fanatic Paris Hilton.

Juxtaposed, those images conjured a question that often arises whenever cryptocurrencies are in a bull market phase: Is the noise a sign the industry is poised for explosive, mainstream integration, or are we seeing the kind of over-hyped, celebrity-infused excess that portends an imminent collapse in crypto markets?

The more I think about it, the more I think the answer is “both.”

That might seem contradictory. So, let me try to break down why it’s not and also explain why this Wild West, boom-bust state of affairs is an unavoidable, intrinsic feature of how this industry innovates and grows.

First, let’s separately consider each state for Schrodinger’s Cat here.

On the one hand, the hyped-up presence reflects a cashed-up industry with both the financial wherewithal and the motivation to try to woo the deep-pocketed institutions attending one of the investing industry’s biggest annual conferences. Why would digital asset companies like lead sponsor NYDIG take on such a large, expensive presence at SALT if they didn’t sense a huge, growing opportunity from institutional investors?

After all, the SALT main stage, featuring multiple crypto-themed sessions, delivered story after story of hedge funds and other traditional financial institutions exploring ever more adventurous investing strategies in bitcoin, DeFi and even NFTs.

On the other hand, there was a very late-2017 feel to the crypto presence, not only with SALT’s own celebrity lineup but at numerous other sideline conferences in New York, such as the Digital Assets Summit, and at late-night parties at rooftop bars and expensive dinners. It’s hard not to worry that as NFTs and various “Eth-killer” altcoin tokens reach lofty new heights, that we’re due for a rerun of the 2018 “Crypto Winter” that followed the previous year’s initial coin offering (ICO) bubble.

Here’s the thing: it’s possible to project – and to prepare – for that selloff while still remaining strongly convinced that the frenetic investment and marketing activity is a sign of bigger, more important things to come. An amped-up money and hype machine is a fundamental driver of the self-perpetuating cycle of innovation and development that is growing and will continue to grow the crypto ecosystem.

People will lose their shirts, yes. But before then, these unfortunate buy-high-sell-low victims will have contributed to the rapid capital formation and opportunity creation that’s building the technical and social infrastructure of a new, decentralized financial system.

Continue reading this column here.

–Michael J. Casey

While the crypto sub-economy operates in a world of its own, crypto is by no means immune from outside world shocks. One part of the global macro economy that crypto investors might want to be watching is the Chinese real estate market.

News that China Evergrande Group, the country’s second largest property company, is facing a cash crunch revives rumors that stablecoin provider Tether is exposed to the troubled Chinese real estate lender’s debt, rumors that it promptly denied. (The speculation is understandable: the company revealed in June that within the reserves it holds to back its USDT tokens one-to-one with the dollar is just under $30 billion in commercial paper. That’s a large stash: surely some if it is in Evergrande, many think.)

But the issue might not be Evergrande, but what it says about the entire, over-indebted Chinese real estate industry. Is there a crisis brewing for that industry? Check out this chart that Bloomberg pulled together with data from China’s statistics bureau. Home sales are at the lowest since the height of China’s COVID crisis.

The bigger question is whether China is a canary in the coal mine for other markets all around the world that have run up heavily in the hyper-easy monetary policy era of COVID. If so, the fallout for crypto from a correction in the world’s housing market or in emerging market debt or in fine art or in commodities might not just be felt by Tether, but by a wide range of crypto tokens that have surged along with all this asset inflation.

Omid Malekan, an adjunct professor at Columbia University who has written favorably about Bitcoin for the FT, seized upon that reference to present Venkataramakrishnan’s essay as reductionist and defensive of the old order that crypto seeks to disrupt:

But of course, the FT’s readership spreads far beyond crypto circles. It includes people like Nicholas Weaver, a computer scientist at the University of California, Berkeley, who seemed to find some absolute (religious?) truth in the provocative piece:

And the kinds of people who write books wrongly proclaiming the “end of X”:

The responses I liked to see, however, were those who found good and bad in the piece while pointing out the absurdity of what was left unsaid. Like Noelle Acheson, now head of market insights at Genesis Trading but formerly head of research at CoinDesk:

Or Maya Zehavi, who wins the prize:

For the Solana blockchain project, whose fast transaction processing capabilities and ease-of-use has attracted explosive growth among developers and a surge in its market capitalization, the week began very well. Lyllah Ledesma reported on Monday that funds holding Solana’s native SOL token attracted $50 million in inflows last week while those dedicated to bitcoin clocked a “paltry” $200,000. This according to digital-asset manager CoinShares.
But on Tuesday, around the same time that Solana CEO was talking in an CoinDesk TV interview about the “dominance” of SOL and his “pretty revolutionary” platform, his team was suddenly brought back to earth. The platform was beset by a massive outage that dragged on for hours. Danny Nelson reported on the frantic efforts to restore service, capturing in the process an evocative image of its empty booth at the SALT conference in New York.
Danny Nelson was back with an update at 2:58 am New York time Wednesday about the team’s move to get the Solana mainnet live again after 20 hours of outage.
It was then left to the crew of CoinDesk TV’s “The Hash” to break it down. As Zack Seward noted of the challenges in developing full service blockchain technology, “this stuff is hard. These are systems that are being built in flight and sometimes they kinda mess up.”