CALL me naive, if not lacking in foresight, as for years I have been critical of Bitcoin and cryptocurrency. Bitcoin has reached astronomical height at a price above $63,250 on Tuesday, April 13, 2021, as crypto-exchange Coinbase Global (COIN) launched on Wednesday, April 14, its direct listing on the Nasdaq.
Coinbase is acknowledged as the largest US cryptocurrency exchange, trading 50 cryptocurrencies including Bitcoin and Ethereum. At the end of the day, Coinbase stock closed at $328.28, up 31.3 percent, for a valuation of $87.3 billion.
Another factor that contributed to the successful IPO is the appointment of Gary Gensler, an MIT cryptocurrency professor, as SEC chairman. He may turn out to be the champion towards regulating the space. I am not alone in being suspicious of cryptos. Based on its latest survey, Bank of America issued a warning that an overwhelming majority of fund managers around the world think bitcoin is just a bubble. Still interest in cryptocurrencies has not waned. No thanks to Tesla’s Elon Musk whose tweets on Dogecoin as his favorite crypto, have caused it to soar by 6,000 percent over the last six months.
A survey released earlier this week by Magnify Money revealed that “22 percent of Americans, including about 35 percent of Millennials and 30 percent of Gen Zers, own some form of cryptocurrency.” That only shows the confidence of today’s generation on cryptocurrency being the way of the future. For now, it remains “more of a speculative instrument than an investment,” according to LendingTree chief economist Tendayi Kapfidze.
The US government has been slow in dealing with crypto, unlike China that has taken the bull by the horns. Already the People’s Bank of China has rolled out a digital yuan in cities across China, making it the first major central bank to issue a virtual currency. It is expected that a broader rollout is planned during the Winter Olympics in Beijing in February 2022, to promote the digital yuan to the world. It has been reported that US President Joe Biden has initiated steps to scrutinize China’s ambitious digital yuan, seeing this development as a threat to the US dollar as the world’s dominant reserve currency. Beijing though claims that “the main intentions of the digital yuan are to replace banknotes and coins, to reduce the incentive to use cryptocurrencies and to complement the current private-sector run electronic payments system -- dominated by Ant Group Co.’s Alipay and Tencent Holdings Ltd.’s WeChat Pay.” It was no accident that Jack Ma’s Ant Group was halted in its IPO in China.
Cryto and digital currency are new frontiers in the monetary system. It requires a unified effort among the central banks of the world to give direction; otherwise, there will be financial casualties in the skirmish.