With the flood of news covering the coronavirus outbreak, and the NYSE even stumbling with what has been called “headline risk” getting introduced to the market, it seemed like only a matter of time before analysts started calculating the coronavirus effect in crypto. History has shown that the crypto market is reactive to world events and, more than that, China is one of the world’s crypto hubs. The potential disruption to the industry that the epidemic poses is real. To get a feel of what those inside the industry think about this situation, we talked with Changelly CEO and long-time crypto innovator Eric Benz. Our talk also touched on reports out of Silicon Valley of a Google bias against crypto companies and the never-ending battle for institutional respect.
A rally in the time of plague
We began our discussion with China. While panic is in the air over what’s happening in the Middle Kingdom, and, as it pertains to crypto, people are worrying about the epidemic interfering with the industry, Benz was quick to point out that the market has actually been bullish. He explained: “Whenever there is a sense of panic in the world crypto prices seem to spike. One of the main reasons crypto has spiked in recent weeks is a direct result of the level of uncertainty in the markets. The correlation is interesting because when the markets are down crypto responds by spiking up.”
Why is this the case? According to Benz, cryptocurrency represents something of a safe haven for people who are either reluctant to trust institutions or want to hedge their bets when those institutions are in peril. Benz said, “In times of trouble, people don’t want to trust any institution or government; they want to protect themselves and so they will avoid controls and keep their money in crypto. It is my opinion that with more uncertainty on the market comes a higher demand for crypto, which increases the prices.”
The paradoxical relationship between troubling events and crypto prosperity is markedly visible if you compare the stock market’s performance in the wake of the epidemic with that of the crypto market. Benz noted: “Stocks couldn’t be more different than the crypto markets. Most of the crypto markets are not controlled by anyone but instead remain decentralised, which means they have no central authority. The stock market is much different in that it only lists regulated assets. In the years to come this ‘model’ could very well change. At least from where we see it, this seems inevitable.”
Benz then addressed the Chinese stock market specifically, noting that unfriendly regulations — something that is often paralleled in China Bitcoin regulation — have made Chinese businesses particularly inclined to move their assets out of the country, and the disruption caused by the coronavirus only stands to amplify this trend: “China is one of those markets which we have to always keep a close eye on. They are very much familiar with market trends and will do whatever they can to move their funds out of China as capital controls make this market very difficult for many people. Crypto offers an escape for many and if this is the answer to unpleasant aspects surrounding capital controls then it will grow immensely which is what we are beginning to see, especially with what has been happening related to the outbreak.”
“No respect, none at all”
From China we turned our attention to the States where Google’s recent anti-crypto measures have raised the ire of the industry. I asked Benz what he thought was behind the moves and whether in his opinion there was any legitimacy to the idea that they were trying to protect users from fraud. Benz interestingly highlighted some possible power dynamics that may be working behind the scenes: “Control is very much at the heart of companies like Google, Facebook, YouTube, etc and they will stop at nothing to maintain it. Without control, the very concept of the services they provide begins to fail.”
In opposition to this centralized power structure, we have crypto. Benz went on: “Crypto is an area in which these major businesses are following very closely with some even leveraging their technology in order to build more advanced services. However, crypto and blockchain technology has the ability to turn these centralised services into decentralised ones, thereby removing any sense of control via third parties and giving control back to the individual users and customers. It will be interesting to see just how the technology matures as this will be a clear indication of if the blockchain breakthrough will have any significant impact on these business models. It will be an interesting next decade that’s for sure!”
If there is a concerted effort by the big players of Silicon Valley to stifle crypto companies, it stands to reason that it will have a significant negative impact on crypto adoption. Benz is of the opinion that the crypto movement is something that can not really be stopped, especially by businesses that operate according to an outdated vision: “When the time comes to really start targeting businesses in respects to their crypto adoption, it will be very clear who is pro-crypto and who is not. If banks and businesses alike do not begin adopting crypto they might as well begin writing their own death certificate. Failure to adapt and apply innovative technologies to their services will not be good for the long term objectives of any business.”
With that being said, Benz was quick to acknowledge that in the here and now, adoption is a big deal for the crypto industry, and Google is not doing that industry any favors. He explained: “The barrier to entry is one of the biggest issues right now preventing global mass adoption with crypto. If one of the most powerful internet companies refuses to promote or provide access to this emerging crypto ecosystem, that’s a setback that we will have to reckon with. However, over time, it will prove to be just another catalyst that inspires people to use more decentralised services without relying on third parties.”
Like the Rodney Dangerfield of the financial industry, cryptocurrency gets no respect. But also like the comedian, the story of crypto and blockchain is a success story. Benz doesn’t see this story ending any time soon, regardless of what the powerful people in California might want: “Over time more and more blockchain-based assets will begin to gain respect and recognition making it much easier for people to identify these things as real, useful assets. In order to achieve this we must continue promoting understanding and adoption and it really begins with education and access. The more education we provide the more people begin to understand and thereby adopt. As more people begin understanding all the benefits, the easier it will become to trust and implement the technology in everyday practices.”
Thank you for reading! As always, stay tuned for more unique insight and news from the crypto industry.