In focusing on certain details, Martin Wolf has missed the big picture about crypto (Opinion, July 6).
Crypto is not an alternative or a rival to money. It is a form of currency. It is extremely similar to conventional currencies — except that it possesses some ancillary advantages.
The market in crypto, like that of all currencies, is cyclical. Crypto has, however, recently seen a particularly extreme cyclical peak — a bubble — because of the extraordinary amount of newly created money in the financial system being drawn to an asset class of moderate size and limited liquidity.
But this bout of speculation in no way negates the legitimacy of the asset (as Wolf suggests) nor does it mean the asset will not be durable.
By way of comparison, in 1983 Nasdaq, which was a relatively small and immature market at the time, also witnessed a speculative peak, followed by a precipitous decline. Many of the stocks that rode the wave did not survive the bear market of 1984, but some did, like Apple and Amgen.
Similarly, many cryptocurrencies will assuredly disappear, while some, like bitcoin and ethereum, will pull through. I do not expect crypto to rival Nasdaq’s gains since 1984, but the dynamic of the market in crypto now and Nasdaq then is similar.
A key driver of the popularity of crypto has been society’s disillusion and distrust of established institutions, and its resultant desire to seek out alternatives marshalled by us, not government, and there is no indication that this will dissipate.
I therefore must additionally demur from your columnist in his opinion that Central Bank Digital Currencies could be a viable alternative to crypto: a state-sponsored cryptocurrency appears to me to defeat the object.
Chief Executive, Tail Wind Advisory & Management, London WC2, UK