Quite often I write here about subjects of which I am oblivious at the time of them happening; whether that is geographically – as I did about China’s 11.11 last week – or some online community. I’m always so surprised at the scale of these things and, in equal measure, perplexed that they did not filter into my news-space. Although as someone who avoids online news and only randomly picks up a paper, maybe I shouldn’t be so surprised!
There is one (actually two but interconnected) area(s) of growth of which I am aware, but which still baffle me, no matter how much I dig. I’m talking of cryptocurrency and blockchain. I know they’re out there and I know they’re huge. The numbers are incredible. But I just struggle with the why and for how long?
I am on the mailing list of an investment firm BZH Capital and they kindly sent me an email which landed into my in-box yesterday. The email contained some startling statistics that served to feed my paranoia about not being informed. Below is a selection[i]:
- Blockchain funding has been at on average about $3bn a year over the past 5 years or so. In the first 9 months of 2021 it totalled $15bn, a 384% increase on typical annual funding.
- “286 equity deals to blockchain/crypto companies in Q3’21. That’s 4.5 deals per business day.”
- “The global blockchain/crypto unicorn (privately owned with valuation of over $1bn)[ii] herd reached 31 in Q3’21 after 12 new unicorns were born”
- “NFT (Non-fungible Tokens) funding skyrocketed to over $2B in 2021 so far, with a growth rate of 6,523% over 2020’s”
I had a meeting last week with someone very versed in this lingo and I couldn’t keep up with either the numbers or the language. The impression I was left with, however, is that there are a lot of people making very large sums of money in this area and the common denominator of who they are is that they are all very young (“very” in this context is a relative term, compared with the age of the author).
Now the thing that preoccupies my thinking in this area is not how do I get a piece of it. My meagre investment portfolio only extends to things I can truly understand. Rather, I am curious where it will all land in the years to come. I have no doubt that both Crypto and Blockchain will massively influence all walks of life, but in what form? On the currency front I suspect that governments will recognise they need to provide an alternative and try and ban or enforce some regulation on independent providers (as we’ve seen in China, India and more recently in the US).
But with over 14,700 cryptocurrencies across 431 exchanges[iii] in existence, I tend to agree with former Reserve bank of India Governor Raghuran Rajan who believes only a handful of cryptocurrencies will survive, comparing it to Tulip mania in 17th century.[iv] Let’s hope that if this correction does happen it is a gradual normalising and those losing out have not bet their life savings on it.
[ii] My addition!
[iv] Quoted on CNBC