Cryptocurrency has been making headlines lately, and often not for good reasons. To gauge what crypto’s highs and lows of late mean for the crypto market in general, Yahoo Finance’s Alexis Christoforous interviewed William Quigley, a long-time blockchain investor, and Wax and Tether co-founder.
This is a summary of that interview.
As background, cryptocurrencies have endured major disruptions lately. Trading volumes of crypto at major exchanges such as Bitstamp, Kraken, and Coinbase have dropped by over 40% in June. In the interview, Christoforous asked Quigley’s insights on whether crypto can recover with these upheavals and whether investors should fall in love with crypto all over again.
Bitcoin’s volatility – what triggered it?
Quigley said that crypto has been going on a rollercoaster ride lately, registering an on-again-off again performance. For example, Bitcoin, the largest blockchain-based digital asset, has had its numbers rise and fall by 10% “hundreds of times” within the past decade. However, it is clear what is triggering Bitcoin’s volatility this time around.
First, China’s blanket ban on Bitcoin mining has hurt its performance. As a result, the ban had a chilling effect on investors, making them question how far China will suppress the asset. Quigley expressed that he believes that China’s motivation for banning Bitcoin is they are coming up with their own stablecoin, and these bans are a way of discouraging the competition.
Second, what could explain Bitcoin’s massive growth was fear of inflation, specifically in the United States, during the early part of 2021. As a result, people tried to get out of vulnerable assets that will be affected by the dollar and switched to assets viewed as stable, in this case, Bitcoin.
Now that the Federal Reserve appears to have downplayed inflation concerns and pumped nearly $100 billion every month into the US economy, people started to think, “we’re going to be alright.” Therefore, with less risk to the dollar now, people are easing their ownership of digital assets like Bitcoin.
On Bitcoin’s prospects
What does the trend in crypto tell us about Bitcoin’s prospects?
Christoforous asked that despite optimistic outlook on the US economy, inflation remains a significant concern for investors. Therefore, is crypto still a viable hedge against inflation, and how can investors benefit from it?
Quigly explained that despite worries about the performance of crypto assets and Bitcoin, the last year proved that Bitcoin is here to stay, after how many years in existence. Furthermore, he opined that it is a strong – and will continue to be a strong – inflation hedge. Bitcoin, for instance, has performed better than gold within the last 11 years.
It has also performed better than any other asset class save the US stocks for the same period. Therefore, Quigley expressed his confidence that Bitcoin will go places in the near future.
What also boosts the prospects of the crypto market is Wall Street’s increasing acceptance of blockchain technology. Investors are allocating part of their portfolio of investments to crypto.