Written By: Isha Goel | May 27 2021
The Consensus 2021 conference is happening this week, bringing together the greatest minds to network, workshop, and converse about the cryptocurrency space and its future. Through interactions with esteemed investor Ray Dalio, CEO Cathie Wood, and others, this immersive virtual experience has prompted major takeaways in only the first two days.
CBDC Research is Being Driven by Competition
As the government is becoming more involved in private money, Federal Reserve Governor Lael Brainard said that ‘the Fed is more interested in central bank digital currencies (CBDC) than previously known.’ This is because as the presence of private money continues to grow, we must consider its impact on the global economy as a whole. Once CBDC has been issued, it is important to keep a close eye on antagonistic nations like China. At this moment, the Boston Federal Reserve and MIT Digital Currency Initiative ‘plan to publish a U.S. digital dollar white paper this summer,’ to further explore implications resulting from a rise in digitalized assets.
We Can Expect Inflation to Decrease Over Time
While current numbers based on April’s Consumer Price Index (CPI) report show that inflation rates are sitting at 4.2%, many believe that this was expected and is not a long-term concern. Federal Chair Jerome Powell had been predicting this for months and even claimed that the ‘central bank will let the economy run hot’ as the country continues to reopen in this trying time. Brainard continuously emphasized that the high inflation rate and its economic effects would subside over time. There would be no reason to worry and this would not cause catastrophic retail consumer behavior trends in the cryptocurrency industry.
Ray Dalio Sided with BTC
Ray Dalio, the founder of Bridgewater Associates, took a major stand on the first day of the conference. He claimed that ‘the U.S. dollar is on the verge of devaluation and could lose its position as the global reserve currency,’ due to fear of rising inflation rates and increased debt in the economy. Therefore he expects that the Federal Reserve will print more money to pay off those debts and the value of a dollar will further drop. He announced for the first time that he is a Bitcoin (BTC) holder himself and would prefer investing in it over a cash bond because ‘bitcoin’s greatest risk is its success.’ What is interesting to consider here as well is that if Bitcoin overshines gold during this inflation rout, there may be a swift ban in the future as it cuts into the government’s abilities to raise funds through bonds.
Other Powerful Figureheads Join Dalio
In discussing important statewide efforts to attract cryptocurrency companies and projects, Wyoming Governor Mark Gordon revealed that he owns cryptocurrency as well. In hopes of having more mining occur in his state, he reminded those who were listening that ‘People often look to New York or Miami or Delaware before they look at Wyoming. But a lot of the pioneering work has been done here.’ As a way to further enable this process, the state ‘has set out some of the nation’s most favorable crypto laws, most recently a bill that would recognize decentralized autonomous organizations (DAOs, or, bits of code) as legal entities.’ He believes that it has paid off for him to be early when big names like Kraken and Ripple Labs have already opened up branches in his state. Of course, it also helped that a $60 billion broadband expansion program recently came into play as well in attracting these digital natives.
It is Now a ‘Fiduciary’ Duty to Hold Bitcoin
Many firms have been trying to buy up Bitcoin in an attempt to get cash off their balance sheets. As this asset depreciates with an increase in inflation rates, the cryptocurrency suggests more promising returns in the future. During a roundtable featuring MicroStrategy CFO Phong Le, the leader was very clear about his buy and hold mentality when he stated that ‘I’m not saying you should put all of your corporate treasury in bitcoin. But if you’re not putting any of it into bitcoin, I don’t think you’re doing your fiduciary responsibility, which is maximizing shareholder value.’ While these inflation issues were previously addressed, many firms are trying to account for the devaluation of cash in the near future to maintain their valuations.
NFTs Have a Promising Future in All Sectors
Non-Fungible Tokens (NFT) have had an amazing year and are expected to be applicable in all sectors such as art, sports, and more. During the second day of this conference, representatives from venerable British auction house Christie’s, the president of Time Magazine, and prominent NFT collectors all came together to present the bullish case for future NFT applications. As people spend more time online, they will become more accustomed and accepting of the value of verifiable digital ownership. As NFT collector Whale Shark put it, ‘NFTs represent a very mature solution – one that takes such assets and is able to give it provenance and scarcity so that they can be treated like normal collectibles.’
Next Steps for ETH and DeFi
Ethereum (ETH) was a major topic of discussion as well and one event at the conference included an interview with Andrew Keys, the Managing Partner at Digital Asset Risk Management Advisors. His support for this cryptocurrency was prominent and he deemed three core properties that made it valuable:
- Capital Asset: ‘Owners of ETH own a piece of fees of world’s global settlement layer.’
- Consumable Asset: ‘ETH is a fuel, a digital commodity. For every computational step in Ethereum, a certain amount of ETH is burnt.’
- Storage of Value Asset: ‘ETH can be freely traded or used as collateral to borrow against in digital economy.’
As a substrate to the digital economy, Ethereum can digitalize all assets, financial instruments, and legal agreements. Keys believes that ETH will surpass BTC’s market capitalization in 2022 as it becomes more widely used and accepted.
“Consensus by CoinDesk: May 24-27, 2021.” CoinDesk, 25 May 2021, www.coindesk.com/events/consensus-2021.
Kalra, Jaspreet. “NFTs Are ‘Art World’s Napster’: Christie’s Auction House Exec.” CoinDesk, CoinDesk, 25 May 2021, www.coindesk.com/nfts-are-the-art-worlds-napster-says-exec-at-christies-auction-house.
Kuhn, Daniel. “5 Big Takeaways From Day 1 at Consensus.” CoinDesk, CoinDesk, 25 May 2021, www.coindesk.com/5-big-takeaways-from-day-1-at-consensus.
Kuhn, Daniel. “Consensus 2021: 8 Questions for Ethereum’s Andrew Keys.” CoinDesk, CoinDesk, 25 May 2021, www.coindesk.com/consensus-8-questions-ethereum-andrew-keys.