Crypto seems to be winning its war of acceptance. But is it a pyrrhic victory, a victory that brings harm to the victor, a harm that differs little from defeat?
In times past highly regarded bankers and investors have called crypto a Ponzi scheme, a scam. Banks have threatened their employes with severe actions if they traded crypto. Crypto has had very, very few fans in traditional finance.
The sad truth is that many critics never took the time to really understand crypto. More than one person has claimed that crypto is blockchain. When smart people mix up the road with cars, they have not put much energy into understanding the whole picture.
Even President Trump before he became a meme coin star criticized crypto in harsh terms.
Now that is changing. Larry Fink of Blackrock is touting the merits of asset tokenization for all asset classes. The US Senate confirmed Paul Atkins as the SEC chairman. Paul Atkins is pro-crypto and expected to establish a clear regulatory framework for digital assets.
Encouraged by such appointments, there are reports that US digital asset firms are considering applying for bank charters and licenses, encouraged by President Trump’s favorable stance towards crypto. If licenses are granted, digital asset firms will become mainstream, taking deposits and making loans.
At the same time, President Trump rolled back legislation that would have extended traditional broker reporting standards to crypto, removing headwinds to decentralized finance going mainstream. The ruling passed both chambers of congress.
Regulators are on task too. In a recent speech, FDIC acting Chairman Travis Hill stated: permissible crypto-related activities will generally be treated just like other possible activities.
These are victories for crypto enthusiasts. But are the victories pyrrhic?
If the crypto market expands due to regulation, the token market will grow, and there will be more crypto looking for tokens. If that money goes into meme coins, which express more speculation than savings, and are just collectibles, the crypto victory may be pyrrhic
In many ways, the key driver of meme coins is the “Greater Fool Theory” which says that investors make money by buying overvalued assets because there is someone willing to pay a higher price. Meme coins have no assets, so in a respect any price is overvalued.
How can we stop a proliferation of the “Greater Fool Theory”, which sows the seeds of disaster as investors clamor for price momentum-based assets? Remember, we have already witnessed meltdowns in some meme coins.
The answer is to promote, at both the industry and government levels, stable coins and bonds. Stable coins and bonds from Mexico, Brazil, UK, Europe, Asia, and other regions should be available to investors worldwide, no bias regarding where the investor resides. Promoting these assets globally will hopefully shift some money away from meme coins and other less stable assets.
If the crypto battle is won and an asset class, driven by the “Greater Fool Theory” dominates, meme coins, the victory will have been pyrrhic.
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