Someone asked me the other day what I thought the catalyst for the next wave of crypto might be.

The first scenario that I thought was likely was that the Fed would have to resume Quantitative Easing because of the extreme pressure that higher interest rates would put on debt service by the government.

As more and more of the government budget gets swallowed up by interest payments, it crowds out new and existing entitlement programs, requiring either an increase in taxes or more money printing, lowering rates. Obviously, increasing taxes is never really popular, so that was my first thought.

Call this the political option because the Fed will have been fully politicized.

In this event, looser money goes after more speculative assets.

The second thought I had was that the Fed, realizing (finally!) that inflation is legit out of control will raise interest rates as high as they have to (into the teens) to throttle it big time. This has the negative side effect of throwing the economy into full-scale recession.

In this scenario, jobs and resources and real growth in the traditional economy are scarce. However, this is where crypto can truly shine (not that I’m rooting for a recession). Because “real growth” can be achieved with lower start-up capital costs thus requiring a lower rate of return on capital to be profitable.

In this scenario “the Recession scenario,” the crypto/digital economy supplants the traditional/recesssion economy as the preferred place for people to earn their living.

This all rests on a major assumption, however, and one that can’t be taken lightly. The user-experience of crypto has to be much better and safer than it is today. (ahem, Radix).

If crypto isn’t safe, easy, and manageable for millions, then the catalyst will not work and, well, it’ll be tough sledding for all of us.

Someone asked me the other day what I thought the catalyst for the next wave of crypto might be.

The first scenario that I thought was likely was that the Fed would have to resume Quantitative Easing because of the extreme pressure that higher interest rates would put on debt service by the government.

As more and more of the government budget gets swallowed up by interest payments, it crowds out new and existing entitlement programs, requiring either an increase in taxes or more money printing, lowering rates. Obviously, increasing taxes is never really popular, so that was my first thought.

Call this the political option because the Fed will have been fully politicized.

In this event, looser money goes after more speculative assets.

The second thought I had was that the Fed, realizing (finally!) that inflation is legit out of control will raise interest rates as high as they have to (into the teens) to throttle it big time. This has the negative side effect of throwing the economy into full-scale recession.

In this scenario, jobs and resources and real growth in the traditional economy are scarce. However, this is where crypto can truly shine (not that I’m rooting for a recession). Because “real growth” can be achieved with lower start-up capital costs thus requiring a lower rate of return on capital to be profitable.

In this scenario “the Recession scenario,” the crypto/digital economy supplants the traditional/recesssion economy as the preferred place for people to earn their living.

This all rests on a major assumption, however, and one that can’t be taken lightly. The user-experience of crypto has to be much better and safer than it is today. (ahem, Radix).

If crypto isn’t safe, easy, and manageable for millions, then the catalyst will not work and, well, it’ll be tough sledding for all of us.