Bitcoin price is back above the US$23,000 mark after a prolonged decline this year that left the cryptocurrency floundering around US$18,000 last month. In another slice of brighter news, the total cryptocurrency market capitalization managed to climb back above US$1 billion.
While the fall in crypto prices in 2022 may have hurt confidence in Bitcoin and cryptocurrencies in general, global crypto exchange AAX and US firm Forrester Consulting have a different view.
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They released a report titled Bitcoin in Emerging Markets which aims to show Bitcoin’s usefulness in different markets beyond just being used as an investment vehicle. Forkast’s Danny Park spoke one-on-one with AAX’s Ben Caselin at the Bitcoin Adoption and Future report launch event.
The interview has been edited for language and brevity.
Danny Park: Your biggest concern about Bitcoin?
Ben Caselin, AAX Exchange: I will change it. I think when we look at bitcoin we’ve got about 10 years of culture and while in the beginning you could say in the decade of emergence you know it’s nice to have such a focus on price and such a focus on the potential gains you can make. But now that we’re in this decade of adoption, and especially as we see adoption accelerating in emerging markets, I think one of the biggest barriers to bitcoin’s growth is focusing on growing it. . I know this sounds very strange, but we just need to focus on the impact it can have and the use case it can have. And elementary, the market will come to its senses afterwards. It’s really changing that perspective that we need to do now.
Park: A growing number of developing countries have succeeded with Bitcoin — were they too hasty?
Caselin: So I think it’s very important that we ask the question, how long does it take for a central bank to change its policy, or how long does it take for a country to build up or increase its national reserves? And I think the answer is probably years. It takes years.
And yes, there are downsides. El Salvador and some other countries have placed Bitcoin on their national reserves. I would say if that’s your policy, generally countries will have multi-year policies [to see results]. And maybe in five to 10 years we might be able to tell whether that decision was timely or not. What is timely, however, is to look at, say, the track record of something like the Turkish lira or the track record of the US dollar or the track record of the Venezuelan bolivar. These have many years of experience and it is not such a good experience. So I think those are the things that we need to focus on now and you know, review the decisions of El Salvador that we can make in a decade or so.
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Park: What are their motivations for making Bitcoin an official currency?
Caselin: There are different reasons for [different] countries, for example El Salvador. It was also about reducing reliance on the US dollar, which I think is absolutely right for any sovereign country to have that kind of independence from a bank external center.
For a country like Congo, I don’t just see it as a way to really strengthen the financial inclusion of your population, to advance financial inclusion. But again, it’s still an independent piece. It is always something that we have to consider a place like Congo as a very dispersed population with very dynamic urban centers. Few people have access to a bank account. How do you send money to your family in a village, which may have a telephone connection?
I would say that as we all know, the Congo is one of the richest countries in the world if you look at its resources and it is one of the poorest countries in the world if you look at its economy and its position in the global economy. I think Congo has plenty of reasons to innovate.
Park: How is education driving bitcoin adoption around the world?
Caselin: Education is important to reduce capacity over time. Why is that ? Because more people are coming in, distribution is generally good at countering willpower and price swings, but it’s also education that makes people panic less about price moves because if you’re there for the right reasons and it’s less price driven, then the price isn’t going to scare you that much either.
So how do you educate people in emerging markets or elsewhere? It’s just to have a conversation exactly like today where you say revealed let’s not focus on price for a moment but instead and don’t just say, oh let’s focus on fundamentals or let’s focus on utility. These are all buzzwords. Let’s just focus on the impact and what it means for people in their daily lives and acknowledge that context. You know, they have different backgrounds. And that means bitcoin, the expression of bitcoin, the use case for bitcoin is different everywhere.
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Park: Will bitcoin reappear as an inflation hedge?
Caselin: So first, we need to ask some questions. Number one, whose inflation?
We have to look at which countries, which places. In emerging markets, I think Bitcoin can absolutely be used as an inflation hedge. In the United States, I think we have to be really honest with ourselves and understand that most of the inflation stories in the United States speak more to the concerns of institutional investors who care a lot about inflation and who worry about buying treasury bonds.
Your everyday American cares about purchasing power. Your everyday American won’t care about Treasuries. So I think this conversation about inflation protection is a bit of a stretch. I think if you don’t like your money, then maybe disadvantaged we just get rid of it, instead of always protecting ourselves against it. Maybe it’s just a bad form of money. And so I can’t think of a single fiat currency that has actually performed very well over the last 100 years. Even your Swiss franc, even the Japanese yen is in trouble.
Park: What is your outlook for the current bear market?
Caselin: I mean, no one can predict the future, but the way I see it is I think during this time, during this type of price action, there are many reasons to say that everything is fine . And if it’s extended, say two years, that would actually be very good for emerging markets. It would be very good for adoption, very good for distribution.
And if before that time people realize that it’s a great form of money and we think we have more exposure to it because it brings value to emerging markets and inflation-worn institutional investors, then we will have an advantage. And I think that’s great. It gives everyone a good feeling, but it’s not sustainable if it goes too fast. So tomorrow Bitcoin to a million dollars is not sustainable. And even I’m a big Bitcoin fan, and I would sell because it’s not sustainable.
Park: Have the crypto and bitcoin markets paid the price due to contagion from the Luna collapse?
Caselin: So I don’t want to say that all of this is due to contagion. Let’s not forget that Netflix is down 75% and it’s not like people aren’t watching movies because 3AC is down. It is an inter-capital market event. It’s a big liquidity event. It’s a change in policy on the part of the Federal Reserve, a change in fiscal policy. There are so many factors that go into the price right now that I wouldn’t say it’s just contagion.
Contagion is actually not the reason. It is in fact overleveraged and unsustainable financial engineering that is simply not yet able to withstand the stresses of the market. Why were there tensions in the market? Not because Luna fell. That’s not the reason.
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