Bitcoin has plunged 58% from its December highs, Warren Buffett has compared it to rat poison, and few people use it for everyday purchases. Other digital coins are stuck […]
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And yet CoinDesk’s annual Consensus conference in Manhattan, the premier event for bitcoin and blockchain enthusiasts, roared with optimism and money. Some of that roar came from the rented Lamborghinis out front, and the optimism may have been stoked by the blockchain-powered free-beer dispensing machines.
But the real evidence that this industry has arrived was the guest list, which had 8,500 names, more than triple the number last year. And those who paid $1,999 to get on the list were more likely than ever to work at the financial companies that bitcoin was once going to replace. Suits follow the money—even after the price drop, the coin world has nearly $400 billion in assets, 20 times more than at the start of 2017.
Yes, the conference still had a goofy energy. Pranksters held a “Free Jamie Dimon” sign to mock the CEO of JPMorgan Chase, a longtime bitcoin skeptic. Crypto-millionaires partied with Snoop Dogg at night. But they also listened respectfully in the morning when FedEx CEO Fred Smith explained how blockchain technology could change shipping. Deloitte alone sent more than 100 people.
Attendees this year were “older and more polished; less T-shirts and more blazers,” says Michael Sonnenshein, managing director at Grayscale Investments, which offers tradable digital coin products like the Bitcoin Investment Trust (ticker: GBTC)—one of the few ways for nonaccredited investors to trade bitcoin without handling the actual cryptocurrency. Grayscale, which hopes to be the WisdomTree of digital assets one day, has attracted $186 million worth of new investments this year, Sonnenshein says.
He no longer has to answer questions about whether bitcoin is only good for drugs and money laundering. “It’s not a taboo thing anymore,” he says. “It makes the conversations with new investors and people raising money substantially easier.”
Investment has only risen as the price has dropped. Companies facilitating digital currency trading and investing like Coinbase and Circle are now worth well over $1 billion—Circle’s valuation leaped near $3 billion on an investment announced at the conference. Many billions of dollars more are being invested in blockchain technology, the innovative software that tracks bitcoin and that can also track and secure almost any other kind of contract or transaction.
“I’m all for financial companies getting involved in crypto,” says Erik Voorhees, a major bitcoin holder and serial entrepreneur. “Crypto as a monetary unit is transparent and legitimate because it’s market-based, as opposed to what they do now, which is handling fiat, which is not transparent and not market-based.”
Voorhees thinks “it’s inevitable” that cryptocurrencies will eventually replace fiat currencies and he doesn’t expect that financial companies will corrupt or sidetrack the effort. “That’s the point,” he says. “It’s pulling them in.”
Other major institutions have already been pulled in, and are seeing a steady pickup in interest. CME, one of the world’s largest derivatives exchanges, started offering bitcoin futures in December. At first, trading was light, and skeptics wondered if CME had put up too many barriers, requiring margins that were substantially larger than similar products. But even as the price dropped and attention drifted, average daily volume has tripled since January.
Asset managers, proprietary trading firms, bitcoin miners, and retail investors have grown more comfortable that the system is safe, says Tim McCourt, the global head of equity products and alternative investments at CME Group. The pickup in volume, open interest, and total customers “would often take years to achieve for new products, and the fact that we can achieve it in four or five months is an assessment that this feels kind of accelerated.”
Not everything seemed rosy. Mentions of regulation were booed. At a panel, regulators from the Securities and Exchange Commission, Commodity Futures Trading Commission, and Justice Department vowed to protect retail investors while not squashing innovation, but attendees were mostly unconvinced. Traders and investors remain confused about which digital coins are securities—necessitating higher reporting standards—and which are “tokens” that can be held and traded by investors with less financial sophistication. That has stalled the market for many coins. “Right now, we’re in a bit of Never-Never Land as to which are securities and which aren’t,” says Cathie Wood, CEO of ARK Invest, an investment manager that started investing in bitcoin through Bitcoin Investment Trust in 2015.
In some ways, bitcoin has long been Never-Never Land—an imaginary place of eternal youth and optimism. It’s growing up fast.
