BTC as a hedge against inflation, and thoughts on the crypto space
I was participating in an online discussion where someone expressed a thought that BTC not acting as an inflation hedge has been very disappointing and “points to the reality that the space is simply about speculating on higher prices…”.
From what I have seen so far, I have to agree with this point. Just to be clear, I am a big fan of crypto, its ideals, and decentralized blockchains. I love the idea of Bitcoin, as well as Ethereum as the first pioneer of capable smart contracts. I own a few cryptocurrencies, and follow and participate in the defi space, DAOs, and on and on. The space has exploded in what it offers, but I just can’t look past a few things in the space from the negative aspects.
To date, bitcoin has been mostly a speculative asset with a few interesting properties. I will say that the network behind the scenes continues to survive stressors that not many networks had to survive: mining relocations and political attacks. Its payment network, Lightning, finally had some growth (https://defillama.com/chain/Bitcoin?currency=BTC). But that’s neither here nor there, it has mostly served speculators of price.
In general, the space has been hijacked by scammers, extreme speculators, and people that have no accountability placed upon them as they already made large sums and are covered for life. Add VCs with mounds of cash and the last two years of money supply conditions and we have the appropriate results: scam projects are launching daily and disappearing shortly after taking money away, millions of dollars lost in hacks, and last but not least various yield schemes that bring things like LUNA/UST debacle, Celsius’ current debacle, etc. Funds got suckered in and ended up driving the prices of the top coins to the moon…
Now that money has gone away, the tide is moving out, and we are uncovering all kinds of schemes that seem so obvious yet had suckered in millions of people and millions of dollars.
In this carnage what seems to be surviving so far are responsible lenders (look at Nexo), decentralized exchanges, and developers are still going strong. Price is moving up and down, but blockchains continue to tick. Projects like Maker, Aave, Uniswap, Compound, Lido, Euler, etc just continue ticking. Offering financial services at reasonable yields and not some BS yield farming adventures. It seems like lending with reasonable APRs is here to stay.
NFTs have brought much suffering to people speculating on prices, yet as a concept has grown and I doubt is going to go away any time soon.
In general, I remain the most intrigued by the concept of DAOs that blockchain ecosystems support. Just this ability to organize a group that has a specific purpose and then allows people to take membership in such a group, without any limitations by the geographic boundaries, socioeconomic class (currently only rich get to participate in things byac but it does not have to be that way), etc. Again, we have seen many shady DAOs, rug pulls, and schemes (e.g. https://cointelegraph.com/news/wonderland-s-treasury-saga-exposes-the-fragility-of-dao-projects-today). Yet the longest surviving and seemingly most successful defi projects are also all DAOs. The key is to make it less about the yield that one can gain from participating and more about the support of the idea/concept.
I don’t know, I am continuing to watch the space, participating in DAOs, buying tokens, and whatnot. Just keeping my eyes open to the possibilities out there, perhaps something will stick in a meaningful way.
