The past week saw Edelman release a new report on cryptocurrencies, Binance.US CEO discussing stablecoins, and Andreessen Horowitz making a prediction about the fourth crypto bull cycle . Alexander S. Blum, crypto investment expert and Chief Operating Officer of fintech firm Two Prime, discusses crypto and blockchain regulaion, stablecoins and a new crypto boom cycle.
Q1 2020 hedge fund letters, conferences and more
- On crypto and blockchain needing more regulation — 60% of those surveyed in an Edelman report believed that crypto needs more regulation. Why is this so? What role can governments and regulators play in addressing the concerns faced by the masses? Can there ever be too much regulation?
- On stablecoins and their rise in prominence — Binance.US CEO, Catherine Coley, recently spoke about the rising role of stablecoins and the greater significance they play in the crypto ecosystem. What are stablecoins’ strengths and weaknesses? Will the rise of stablecoins cannibalize existing demand/interest for bitcoin?
- On high quality projects driving a new crypto boom cycle — Venture capital firm Andreessen Horowitz predicts that high quality projects will drive a new growth cycle in the industry. To what extent is this assessment accurate?
On Crypto and Blockchain needing more regulation:
“Last week, Edelman published a report on cryptocurrencies, with 60% of those surveyed believing that crypto needs more regulation. Additionally, only 35% of respondents believe that crypto and blockchain technology will have a net positive impact on society. We have seen a return of interest to blockchain over the last couple of weeks, particularly with the halving — are these financially or technological driven? The vast majority of people appear to follow bitcoin prices without having a good understanding of what blockchain does, why it matters or how it is different from the way banks or regular databases function today.
Blockchain is here to stay, for better or worse. The price and money aspect of things is a powerful psychological concept that will likely drive information for some time, and this makes people fearful. While tighter regulation may mean more security for them, this is a generalization that may not necessarily always apply. 35% of people probably wouldn't even understand what blockchain or cryptocurrency is. P
erception and branding tend to appeal more than fact, and shared feelings and beliefs amongst people can have powerful effects. New things generally intimidate — it is not surprising for crypto and blockchain to have mixed reputations. Just like how people would expect the printing press to be regulated when it first came out — crypto and blockchain are going through a similar phase before we see further adoption. Regulators have a role to play, and it is usually a tricky balance between protecting and safeguarding the interests of society, and not stymying innovation on the other.
Regulations differ for countries, depending on their national interests, tax motivations, and the new opportunities available — these are usually political with no consistent approaches to them. While the very nature of crypto and blockchain can make them a challenge to either control or regulate, regulation can still serve as a guide, especially for larger and more legitimate actors. The technology will persist and find its way to flourish — the choice is ours whether to embrace or to dodge its pervasiveness.”
On stablecoins and their rise in prominence:
“Binance.US CEO, Catherine Coley, recently spoke about the rising role of stablecoins and the greater significance they play in the crypto ecosystem. Stablecoins are unique in that they allow people to move money globally without the undue volatility and price swings we have seen with bitcoin. Bitcoin, with its largest network of adoption, is typically the preferred choice for people to move money, especially where capital controls are prevalent. However, if there is another alternative that is stable, and equally capable of achieving the same ease of money movement, demand for it can possibly take market share away from bitcoin.
At the same time, stablecoins as financial instruments or investment instruments have minimal upside potential, and can carry a great deal of risk, given the lack of clarity as to what they are backed by — the 1:1 USDT is known not to be 1:1 backed. We may see the collapse of some of them over time — only time will tell. As people look to the different aspects of cryptocurrencies to solve their varying problems or needs, there will always be a role for not only bitcoin, but also a less volatility alternative that can similarly achieve some of the money movement objectives.”
On high quality projects driving a new crypto boom cycle:
“Less than a month after launching its new $515 million crypto fund, Andreessen Horowitz is predicting that high quality projects will drive a new growth cycle in the industry. What this means: the price of bitcoin and other crypto goes up, drives new interest and social media activity, which then drives new participants, and ultimately draws new projects to the space. This is an optimistic view — while there will indeed be a lot of interest from people attracted to the price and money aspect of things, along comes both good and bad actors, each with their own implications. It is important to differentiate what is legitimate and real from and what is likely to be unsustainable in the long run. Ultimately, it boils down to the people behind it, the idea itself, and who is interested.”
About Alexander S. Blum, Chief Operating Officer of Two Prime
Alexander S. Blum, Chief Operating Officer and Co-founder of Two Prime, has worked across blockchain hedge funds, startups, and consulted in the space for over seven years. Prior to founding, Alex started digital investment group Atomic Capital, developed a cryptocurrency mining operation and AI-crypto hedge fund, and worked as a technology advisor for the Bill & Melinda Gates Foundation, The World Economic Forum, and an economic development specialist for the Peace Corps.
About Two Prime
Founded by Dr. Marc Fleury and Alexander S. Blum, Two Prime is a fintech firm that focuses on the financial application of crypto in the real economy and is rethinking the approach to crypto application.
