In May 2018, Coindesk held its three-day Consensus conference in New York with huge and enthusiastic crowds going crazy over all things blockchain. This week, Coindesk reconvened the cryptocurrency crowd in Midtown Manhattan for Consensus:Invest in the face of very different market fundamentals.
What a year it’s been for cryptocurrencies. The raging bull market that saw Bitcoin rise above $10,000 for the first time almost exactly one year ago today has turned into a monumental rout, with prices down nearly 75 percent since the beginning of the year. In this environment, what could be expected from the conference? Not surprisingly, the number of attendees was down by at least 50 percent but, on the other hand, the level of positive and constructive attitudes was, if anything, higher than it was in the spring. What was going on at Consensus:Invest?
Heavy hitters in the morning sessions
The morning session featured a couple of big name presentations, with Michael Casey interviewing Kelly Loeffler and Jeff Sprecher from Bakkt/NYSE/ICE, a surprise appearance from DRW’s Don Wilson on a security token panel, and Andrew Ross Sorkin in conversation with Dr. Mohamed A. El-Erian of Allianz. While none broke any significant new ground, the net effect of their presentations was positive for digital assets in general and cryptocurrencies in particular.
If the creation of cash-settled Bitcoin futures contracts by CME Group and Cboe Global Markets was an important milepost in the development of cryptocurrencies, then the addition of physically delivered futures is viewed as the next major step in the evolutionary growth of the asset class, and NYSE/ICE’s Bakkt has captured the markets attention in that regard. They recently moved the launch back by one month but that makes sense given that a launch prior to the Christmas/New Year’s break could be detrimental to building market momentum. In any case, Loeffler and Sprecher made a powerful case for their effort, particularly as they represent the largest exchange operator in the world and the Bakkt team includes Starbucks and Microsoft as partners.
Don Wilson was an unannounced addition the the panel on security tokens as it was announced that DRW’s real estate arm, Convexity Properties, has teamed with fellow panelist Josh Stein’s Harbor to offer a tokenized student apartment project called The Hub at Columbia. While it’s not the first blockchain backed real estate investment vehicle, it represents a further evolution of the use of tokenization and the spread of blockchain as a technology.
The appearance of El-Erian was an interesting addition because he is a recognized and respected market expert and he came out with a strong endorsement of blockchain technology. Among the points he made were:
The drop in cryptocurrency prices is typical of new technologies as they end their first cycle, one that is characterized by over consumption and over production. This phase is to be followed by a blow-off bottom, which likely hasn’t been reached yet.
He compared the technical stack of blockchain to capital structure with technology as the senior instrument, cryptocurrencies next and ICOs as the lowest quality investment.
The Chinese are well suited to succeed in blockchain because they are good at setting 10 year plans, taking 2 or 3 steps and then course correcting. Their success in mobile payments is an illustration of this.
Away from the crypto conversation, the biggest threat right now the he sees now is that risk has migrated to non-banks with an example being that there is an over promise of liquidity as characterized by an ETF that is created on an illiquid asset class. Tread carefully.
The best of the rest
Coindesk packed the schedule for the day with many of the panels lasting only 20 – 30 minutes. As a result, there was far too much presented to faithfully cover it all in a short recap. That being said, some of the highlights from the panels included:
Mark Yusko of Morgan Creek stating the “everything will be tokenized” on the “Is Bitcoin the Most Important Macro Hedge in the World” panel. He wasn’t the only one to say this during the course of the day.
Will Peets of Passport Digital shooting down as “patently false” the idea that the fall in cryptocurrency prices to the fall of the Nasdaq index because there is little or no cross-ownership between the two.
Tyrone Ross of NobleBridge sharing that his millennial-aged investment clients are displaying no signs of panic and, instead, are fully committed to a crypto future.
Josh Brown of Ritholz predicting that Bitcoin prices will triple if the SEC approves and ETF
Gabor Gurbacs of Van Eck / MVIS was the first to announce a major new initiative to establish industry standards through the creation of the Association for Digital Market Assets (ADAM), an effort that also includes Galaxy Digital, Genesis Global Trading, GSR, Hudson River Trading, Paxos, Symbiont, BitOoda Technologies, BTIG, Cumberland and XBTO.
In addition to their participation in the creation of ADAM, Van Eck also confirmed that they will be teaming with Nasdaq to offer Bitcoin futures in Q1 2019.
A word – or two – from SEC Chairman Jay Clayton
One of the most anticipated and well attended sessions of the day was a fireside chat between Glenn Hutchins of Silver Lake and North Island and SEC Chairman Jay Clayton. It went about as expected as Clayton was clear and candid as he could be and as obfuscating as he needed to be. Hutchins began and ended the session by jokingly asking Clayton if he owned Bitcoin (Clayton gave no answer on both occasions) and in between touched on the major issues that all market participants want to know the answers to: how much more enforcement against ICOs will there be, will Ripple be classified as a commodity (i.e. not a security) and, most importantly, when will the SEC approve a Bitcoin or cryptocurrency ETF. Clayton gave strong non-answers to each of these questions but managed, at the same time, to be open, honest and communicative about the SECs approach to cryptoasset regulation. Being steps from the Broadway theater district, he attempted a tickets-for-investment analogy that didn’t quite make sense but you have to give him points for trying. When it comes to cryptoassets, the SEC is following its tradition of principles based regulation and that should be good news to the markets. The not so good news is that there is still no clarity on when the SEC will approve an ETF as Clayton floated price transparency and fairness along with security in custody of the assets as key issues that need to be addressed. The consensus in the crowd seemed to be that the SEC won’t approve an ETF any time soon.
A few more thoughts
ICOs are out, security tokens are in. In fact, ICOs were barely mentioned in any of the presentations.
The number of hoodie wearing, Lambo driving crypto cowboys dropped dramatically from last Spring. In fact, no Lambos were sighted at all.
The “Future of Futures” panel was strong but lacked zing. JJ Kinahan of TD Ameritrade, John Tornatore from Cboe Global Markets, Juthica Chou of LedgerX and ErisX’s Tom Chippas made good cases for the existing success of Bitcoin futures and options and plans for new products but the bigger thunder these days is coming from other areas. That may well be the shape of the future for futures as full crypto means much more than just futures and options.
Caitlin Long, formerly of Symbiont.io and a main driver in Wyoming’s emergence as a cryptoasset pioneer, was a great example of the energy that’s lighting up crypto and she recommended reading “The Block Chain Plunger” to see how the current equities settlement hurts investors.
At the end of the day
Like the dotcom bust before it, cryptocurrencies have fallen in spectacular fashion this year but, at the same time, it is a widely held view that the establishment and validation of blockchain technologies is setting the stage for a future where crypto is a main driver for change and innovation in the global economy. In that vein, the mood and content at Consensus:Invest was upbeat and optimistic at the same time that it was also more realistic than it was in the frothy days of May this year at Consensus. It will be interesting to see where we are when Coindesk and NYC give us Blockchain Week 2019 next May.
Editor’s note: You can find recaps from the three days of Coindesk Consensus here, here, and here.