The Future of the Crypto World: A CoinDesk Event
Speaking exclusively to CoinDesk Korea, Bybit’s very own Ben Zhou (CEO) and Igneus Terrenus (Head of Communications) share their perspective on the future of the crypto world.
Ben Zhou, CEO of Bybit
Hello, everyone! My name is Ben Zhou. I serve as the CEO of Bybit. We are delighted to have you join us at this special event hosted by CoinDesk, and together take a peek into The Future of the Crypto World.
It has been an eventful first half of the year. Weeks in the crypto space seem like months, if not years or decades. We had all-time highs upon all-time highs; we also lived through the worst ever month for Bitcoin in both absolute and percentage terms in May. Yet one thing is clear: Crypto has gone mainstream. Some of the world’s richest people cannot shut up about crypto. Celebrities are falling over one another to put on their laser eyes, either because they have become true believers, or because the level of fan engagement in crypto is just not seen anywhere else. Even a nation-state is talking about making Bitcoin its legal tender.
Despite what happens to the BTC price day-to-day, the number of active Bitcoin wallet addresses continues to climb, even as whales, long-term holders and institutions continue to accumulate. So, where do we go from here?
The way I see it, when you have done your own research, and recognized the true value of crypto, your perspective just changes. When you look at horizons beyond hourly and daily candles, clarity gradually emerges. Bitcoin has had an average of 200% annual growth since its inception. Crypto is becoming a store of value against the backdrop of loosening monetary policies and relentless central bank printing.
What’s truly heartening and inspiring is that brilliant minds are increasingly coming to crypto, and finding ever more innovative solutions and imaginative use cases. The Lighting Network and Taproot adoption are showing positive signs already, while ingenious DeFi applications are arriving almost daily. Sports teams are all “looking into” NFT, as regulators around the world are finally giving crypto the attention it deserves.
Make no mistake: Being a Luddite is not going to be a good look in retrospect. We are on the cusp of a great paradigm shift: If you thought Google and Facebook disrupting advertising was big, Amazon and Alibaba disrupting brick-and-mortar stores was big, or Tesla shaking up the auto industry was big, wait until you see traditional finance meet the rising tide of crypto.
With crypto adoption at about 2% of the world’s population, we are still incredibly early. But it is just becoming riskier not to embrace crypto than to do so. From skipping the intermediary and save time and cost, to an incorruptible repository of information, to true financial inclusion and a level playing field, to store of value and generational wealth, to removing the need for violence and coercion when it comes to ensuring security, to supporting and subsidizing renewable energy sources — crypto holds so much promise.
And the path to the future of the crypto world is up to us to forge. I feel truly grateful and gratifying to work on this crucial movement. I cannot tell you how excited I am getting out of bed each morning.
Igneus Terrenus, Head of Communications at Bybit
Hello, everyone! Thank you for tuning in! I am Igneus Terrenus, head of communications at Bybit. It is my pleasure to speak with you on The Outlook of Global Crypto Market.
Crypto has been one of the most propulsive and energetic conversations in the past months. Even as Bitcoin has been a revitalization play for celebrities, companies and now even countries. Let’s first do a pulse check around the world.
There is somewhat a bifurcation between the East and West in the crypto story. We observe a cultural divergence between crypto investors in Western and Asian countries. Due to the easy availability of cryptocurrency ETPs in the West and household wealth allocation traditionally being concentrated in passive investment vehicles — buy and hold approaches have been more prevalent. Conversely, Asian investors are culturally more inclined to concentrate store-of-value exposure into physical assets like real estate.
This effect is compounded by a relatively tighter monetary policy environment compared to the West, resulting in reduced appetites for using crypto as a hedge against monetary debasement.
Furthermore, investment hurdle rates tend to be higher in Asia, which can be seen in Asia-centric quantitative funds versus their Western counterparts. Hence, Asian cryptocurrency traders are more opportunistic in nature, while professional trading operations are more focused on smoothing out market inefficiencies, employing leverages and so on.
The story is further complicated by the situation of emerging and economically underserved markets. Nigeria and Turkey, considered regional economic engines before the pandemic, have been posting double-digit inflation rates. Argentina’s current inflation rate is 46.90%. That number is 71.4% in Sudan. Down south, Zimbabwe’s hyperinflation has reached 676%, but nothing is as dire as the situation in Venezuela, where the inflation rate is at an eye-popping 9,986%. Even before the pandemic hit, Venezuelans on average lost a third of their bodyweight in 12 months. Leaving the fruit of your labor in fiat is simply not an option in such circumstances. Is there any wonder that citizens of these nations are clamoring for Bitcoin?
Whereas one may point to certain investment and trading patterns in Asia or North America and chalk them off as speculation, crypto adoption in struggling economies may be a moral and humanitarian necessity. After all, not all of us live in the luxury of stable governments and healthy economies. We are, however, heartened to witness entrepreneurship and the spirit of innovation, surviving and thriving in even the harshest conditions.
But the traditional banking system till this day works to the exclusion of 30% of the world’s population. The intermediary costs for remittances sent to countries that most need them are often the most egregious. Crypto adoption now hovers just above two percent of the world’s population. Bringing crypto to the first 200 million maybe about wealth generation and generational wealth; bringing crypto to the next two billion will be about human rights.
To truly democratize crypto and make it a universal human right, we need regulations. Regulatory clarity will bring order to the market and benefit all participants of the crypto economy. But the question is: What is the right regulatory approach? The core idea behind crypto-enabled finance is not so different from traditional finance — it’s also predicated upon the buying and selling of risks.
In a sense it is not even so different from buying flour at a lower price point, turning it into bread, and then selling it at a higher price point. Therefore, it is not necessary nor advisable to have an alarmist reaction. Nor should we retrofit crypto into some old law made a half a century ago for a different subject matter, for that would be to force a square peg into a round hole. Regulation should incorporate the input from those most knowledgeable about the technology — the innovators themselves.
The decentralized nature of cryptocurrencies represents the future of money and requires a paradigm shift from current thinking. Proposals of a crypto regulatory framework should comprise regulatory technology (RegTech) and crypto-native solutions such as smart contracts, and not default to some outdated standard that is already showing its age.
Leaders and innovators in the blockchain and crypto space need to have a seat at the table, where they can inform and counsel regulators. The contention between regulation and innovation is not in their goals — both want to foster new economic opportunities while protecting its participants — but in what is the best approach.
We want to work together with regulators to shape the guidelines around this technology, addressing their concerns while allowing for innovation in the critical quest to expand access to financial markets and economic opportunity.
One of the most promising ways to achieve crypto-enabled financial inclusion is through decentralized finance, or DeFi. With lending, futures, options and synthetic assets, DeFi protocols are already building an alternative to traditional capital markets — except with significant advantages.
Decentralized exchange protocols, also known as automated market makers, or AMMs, allow for trades that are settled in near real-time. In the case of an Ethereum-based project, that number is about 13 seconds. Compare this with the two days (T+2) it takes to settle most liquid securities in today’s advanced capital markets.
Financial institutions participating in capital markets are required to reserve cash on their balance sheet to cover their exposure to the risk of non-delivery by their counterparty. Until a transaction is settled, parties in a trade must tie up cash on their balance sheet to compensate for the risk. With the near real-time clearing and settlement enabled by the blockchain technology, the reserve requirements can be a fraction of the amount needed to hold in reserve with two-day clearing and settlement.
If AMM-like protocols could be adopted in traditional finance, the vast majority of capital tied up on the balance sheet today across banks and financial institutions could be put to economic use in the capital markets, turning an opportunity cost into economic gain.
Institutional participation is the rocket fuel for crypto to play a positive role in more lives and for DeFi to go mainstream. But the persistent narrative critical to crypto’s energy use presents a hurdle to the same institutions. Therefore, it is important to address the sustainability topic head on. Energy consumption does not necessarily equate emission; crypto miners tend to go where energy is the cheapest — often hydro or solar power sources that would go to waste if not used and produce no or minimal carbon footprint. So the energy consumption is actually good as it helps to support and subsidize the green energy it utilitizes.
At Bybit, we ourselves have been scouting out such energy sources, and supporting them through our cloud mining product. Our work here is never finished. But we are proud of the progress we have made.
As industry insiders, we are extremely bullish on the future of crypto. And more importantly, we feel an immense sense of responsibility to guard and guide such a future that will benefit the world and the people in it. We are ready and prepared to devote our time and effort into this worthy cause that holds the promise to promote financial inclusion, preserve dignity and sovereignty, and be a positive force in the combat against climate change.