“The most important quality for an investor is temperament, not intellect.”
Warren Buffett, Chairman and CEO of Berkshire Hathaway
It should not be lost on anyone that the one contingent that is NOT clamoring the end of “crypto” is Wall Street, or “TradFi”.
Blockchain Is Much More Than Crypto (WSJ) by David Solomon, Chairman and CEO of Goldman Sachs
Goldman Sachs to Spend ‘Tens of Millions’ on Discounted Crypto Investments After FTX Implosion
The list goes on in the past few months…
In a year of crypto markets mayhem and domino bankruptcies, supportive headlines from prominent Wall Street institutions like Goldman Sachs, Citadel, etc. continue to roll in. And those are met internally by committed investments to build trading and risk origination businesses around or using blockchain technology. In other words, leaders like Ken Griffin at Citadel are putting their money to work in the space. It’s not necessarily much in relation to their overall business scale, but it should be noted for its consistency and timing.
Bitcoin, in its origins, was about abandoning the system of social and political trust underpinning the modern monetary system that has evolved over centuries and replacing it with cryptographic proof. The touted key property of the underlying blockchain was that it enabled multiple parties to achieve agreement on shared information without a trusted intermediary. Many iterations on this initial architecture have been pursued and implemented subsequently, but in the end, they are all governed by their own form of consensus, much like the existing monetary system.
The initial advent of Bitcoin, and subsequent rise of “crypto” is a likely manifestation of socio-economic malaise after the GFC in the vein of movements such as “Eat The Rich”. There is a common theme of wrestling ownership and control over one’s financial destiny away from governments and the powerful interests that lobby them. The gradual adoption stemmed from well founded intuition from constituents that asset holders benefited disproportionately from state-operated financial engineering required to support the economy and ensure social stability in the aftermath of the GFC. However, along the way, the initial bitcoin monotheism became polytheism as new entrants each pushed their own religion and associated narrative. So “crypto” became this hodge-podge of mutually inductive, yet vastly different beliefs.
Casino capitalism as a form of social appeasement (Panem et Circenses) drove unfettered speculation and enthusiasm, enabled by the cohort of trading firms, venture capitalist firms and outright scammers (hackers, ruggers and snake oil salesmen). But it also bluntly accelerated the funneling of capital towards innovation.
For better or worse, Satoshi gave us the concept of a coin-operated distributed ledger technology (blockchain). The technology is highly flawed, but will evolve. It gave us a blueprint and we ought to trust human ingenuity. The eventual tokenization of valuable fiat-denominated assets, goods and services on blockchains will achieve deeper disintermediation, access and fungibility that ultimately benefit dollarized financial services globally. If played well, this is a great opportunity to increase the dollar’s global footprint. There will be a market for new type of securities required to run, govern and operate the infrastructure. Most of the volumes will be in tokenized versions and evolutions of our current financial system.
That’s what TradFi is after.