BL Magazine Issue 62 May/June 2019

Page 48


Will the real use for

cryptocurrencies please stand up?

Cryptocurrencies started as payments systems, Then became niche financial assets. Now, especially for the Channel Islands, their underlying technology is driving efficiencies in finance CRYPTOCURRENCIES HAVE BEEN on a Words: Paul Bryant

48 may/june 2019

wild ride. Investor frenzy in 2017 drove the price of Bitcoin – the most common cryptocurrency – to jump by 22 times. Then, in 2018, its price collapsed by 70%. Nouriel Roubini, Professor of Economics at New York University’s Stern School of Business (who predicted the global financial crisis), told the London Speaker Bureau this year: “I have called cryptocurrencies the mother and father of all bubbles now gone bust. The crypto bubble has burst for good and will not recover as these were assets with no intrinsic value.” But the story just won’t go away and the mainstream financial press still can’t resist a good crypto headline. In February 2019, Bloomberg reported: ‘First US pension

funds take the plunge on crypto investing’. However, a look under the bonnet reveals a much more nuanced development. According to Anthony Pompliano, CoFounder and Partner at Morgan Creek Digital Assets – which runs the fund into which the pensions in that news story invested – two pension funds each allocated well under 1% of their capital into a venture capital fund that puts 85% of its capital to work investing in blockchainrelated start-ups and a maximum of 15% into cryptocurrencies directly. It indicates a general sentiment among investors – an ultra-cautious approach to cryptocurrencies themselves, with a growing bullishness on the potential of the underlying technology, blockchain, to spur

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