Chris had also compiled very counter intuitive figures. He was notably arguing that Fiat was more speculative than Crypto by looking at their respective Trading-to-transacting ratio (~2% for bitcoin vs ~10% for global fiat). He also made the case that Bitcoin had the same risk-reward profile than oil and a daily volatility inferior than Twitter.
Cryptoassets were compared to equities in the 17th century. Tuur Demester and Spencer Bogart also brought an interesting analogy by comparing the value distribution of cryptoassets with the TLD (Top-level domain) market with Bitcoin being the “.com” and the altcoins being the others TLDs (.net, .org, .io…).
In the last 50 days, bitcoin has averaged well over a billion dollars of daily trades globally ($10 billion dollars for the entire asset class), not taking OTC trading into account.
B2C2 founder Max Boonen had insightful comments explaining that as the market was retail-driven (at least so far), there was an under-investment in tech (poor feature sets, unreliability…) because “retail doesn’t care”. This needs to change if professional investors are to enter the market.
He also made the case for separating the trade from the settlement. Because the trade needs to happen as fast as possible, which is incompatible with the settlement in cryptocurrencies which will always happen on-chain. He concluded that buying cryptocurrencies today can be safe but “to trade cryptocurrencies today you still have to trust third parties much more than you are used to in traditional finance”.
Arthur Hayes from BitMex and professional trader had very interesting (and funny) comments about trading cryptocurrencies. He started by pointing out the challenge of trading 24x7: you have to be organized to be watching 24x7 if you don’t want to be exposed to a big gap risk.
He went on to explain that today’s derivative markets are mostly retail based, hence mispriced, making them a candy store for experienced traders: it is "easy" to make money with only basic trading strategies. This is why a lot of them quit their job, or trade crypto on the side while at their job :)
Finally, when asked about decentralized exchanges, he sees developers focusing on the wrong things: “liquidity is key, traders will favor centralized exchanges over decentralized exchanges any single day if liquidity is better on centralized exchanges”.
While credit is not well seen by the crypto community, Adam White from GDAX told the crowd that there was “a strong demand for credit in the space”. Not only for leverage, but also to let investors hedge their investments. To address this very topic, in a very PR-reading talk style, Tim McCourt from the CME Group announced the details of the very awaited Bitcoin Futures [NDLR: launching on Dec. 18th].
Also, the CME group unveiled the BRR (Bitcoin Reference Rate) and the BRTI (Bitcoin Real Time Index). An much needed initiative as Bitcoin has no official, agreed on, trading price as of today (the spread across exchanges can sometimes be huge) and it is absolutely needed if professional investors are to enter the space.
Even though cryptocurrency traders had criticism regarding the product announced (no weekends, the BRR/BRTI being based on exchanges that might suffer from price manipulation attacks…), they were all pleased to see this type of product coming to the crypto space.
Cryptoassets custody was a much discussed topic both on and off stage. Even though Coinbase recently launched its cryptoassets custody service, while other players like Ledger are developing solutions for professionals, most panelists argued that there is a need for more cryptoasset custodians on the market. Too much concentration in custodians is not good, the high valuation of crypto assets will be a stress test for custodians who might not all be able to handle the pressure of high valuation when it comes to security.
Another problem noted when comparing the cryptocurrency space to traditional finance was the absence of insurance on custody. Finally, it was interesting to hear that the custody business might very well evolve with Proof-of-Stake, as they will now custody naturally yielding assets.
2018 predictions and bubble discussions
Obviously, most of the panelists did not like the bubble analogy, arguing that we were more witnessing the initial excitement around the adoption of a new disruptive technology.