Two significant events recently indicated crypto may have peaked: validation from the SEC and dismissal from the World Economic Forum (WEF). According to Bloomberg, these signal cryptos have gone mainstream, meaning their best days are likely over. The SEC approved a Bitcoin exchange-traded fund (ETF), making investment easier.
However, at the exclusive WEF, crypto was clearly excluded. Last year, it was a hot topic, but this year, the focus was artificial intelligence. Crypto didn’t even score invites to the best parties. While the Bitcoin ETF legitimizes crypto as an asset, its banishment from the WEF signals the establishment has moved on. Crypto going mainstream appears to have peaked its value and appeal.
Crypto has defied expectations, with valuation unsupported by clarity around its utility.
In the absence of widespread adoption as a medium of exchange, Bitcoin is poised for potential collapse, challenging the foundational principles of currency value acquisition, as expressed by investing legend Eugene Fama.
True, any coin has a finite supply, theoretically making it an inflation hedge. But many collectibles also have finite supply without accruing billions in value. Crypto’s extreme volatility undermines arguments and hedges anything effectively. Using virtual currencies to hedge dollar risk makes as much sense as flooding your home to hedge against fire risk.
Crypto Goes Mainstream
The former edge of digital assets enabled black market transactions and served as a failsafe if the entire U.S. economy collapsed. But not so completely. It couldn’t supply computing power to access your digital wallet. Becoming mainstream removes crypto’s edginess and rebel status of being outside government control. An SEC-approved, exchange-traded Bitcoin fund is the opposite of edgy.
And the reality is Bitcoin’s price has fallen each time it becomes more accessible. The CBOE Bitcoin futures started trading in December 2017. Then came the Coinbase IPO in April 2021. And now a Bitcoin ETF – each met with price drops rather than attracting buyers.
Trading on public markets incorporates more information into price discovery, revealing Bitcoin’s actual value is not nearly as high as once believed. And shedding its outsider status negates much of its original value proposition. Bitcoin’s price may keep spiking, but this is not the hot Bitcoin of 2021. As a mainstream asset, it’s about as exciting as a bond fund, only much more volatile and lacking the ability to effectively diversify risk.
Nothing signals going mainstream like getting snubbed at the insider WEF meeting. Digital assets have gone from claimed solutions to global problems to another dull asset. It likely didn’t score invites to the Davos hottest parties either.
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