FTX founder Sam Bankman-Fried was invited to participate in “Sohn 2022″ for an interview. The interview was moderated by Patrick Collison, founder and CEO of Stripe, a $7.4 billion payments company. During the interview, the two sides talked about many topics, including recent market conditions, the impact of cryptocurrencies on the U.S. dollar, and more.
Is Bitcoin the Worse Gold?
In the beginning, host Patrick Collison mentioned Bitcoin. It said that although many people regard bitcoin as gold, even because bitcoin is easy to trade and carry, it is regarded as better gold.
However, as an asset allocation, the price of gold is counter-cyclical (Counter-Cyclical), while Bitcoin is indeed pro-cyclical (Pro-Cyclical). In this regard, Patrick Collison asked: Does this mean that Bitcoin is in fact a Worse gold?
SBF believes this involves what drives the market.
For example, if geopolitical factors drive the market, then usually Bitcoin and securities stocks are negatively correlated. If people in these countries are unbanked or excluded from finance, then digital assets or bitcoin are likely to be another option.
However, over the past few years, the main factor driving the crypto market has been monetary policy: inflationary pressures now force the Fed to change monetary policy (tighten the money supply), which leads to market changes. During a monetary tightening cycle, people began to think that the dollar would become scarce, and this change in supply would cause all dollar-denominated commodities to fall, be it bitcoin or securities.
On the other hand, most people think that today with higher inflation, it should be a big positive for Bitcoin, but the price of Bitcoin continues to drop.
In this regard, SBF believes that inflation expectations are driving the price of Bitcoin. Although inflation has been rising this year, market expectations for future inflation are falling.
“I think inflation should moderate in 2022. In fact, inflation has been rising for a while, and until recently something like the CPI (consumer price index) did not reflect the real situation, and inflation in the past It is also the reason why the price of bitcoin has been rising in the past period of time. So this year is not the rise of inflation, but the expected mentality of falling inflation.”
Is Rising Real Interest Rates Good or Bad for Crypto Assets?
Last week’s 8.6 percent annual increase in the CPI index hit a 40-year high, fueling doubts that the Federal Reserve may increase the strength of interest rate hikes. It is generally believed that rising interest rates, especially real interest rates, will cause the stock market to fall, but what about crypto assets?
The host asked: Is the rise in real interest rates good or bad for crypto assets?
SBF believes that an increase in real interest rates has a negative impact on crypto assets.
It explained that an increase in interest rates means that less funds are flowing in the market, and crypto assets have the attributes of investment assets, so they will naturally be impacted. In addition, rising interest rates will also affect the willingness of institutions and capital investment.
SBF said: In the past few years, major investors such as venture capital and institutions have been actively investing in the stock market and the crypto market, but in the past few months, these investment institutions have started to sell their assets, which triggered the selling pressure of stocks and cryptocurrencies.
The impact of cryptocurrencies on the dollar
Next, Patrick Collison talked about the impact of cryptocurrencies on the U.S. dollar.
First of all, he quoted Peter Thiel, the godfather of Silicon Valley venture capital, saying that many people, like Peter Thiel, believe that cryptocurrencies such as Bitcoin are regarded as currencies that can replace the US dollar. Reasons for this include lower transaction fees, coupled with greater financial inclusion, making financial services accessible to 7 billion people.
So to me, I don’t know whether the crypto ecosystem is good or bad for the dollar, what do you think?
SBF said it understands Patrick Collison’s confusion as it is not a one-dimensional problem.
Cryptocurrencies themselves are multifaceted products. On the one hand, it is a more efficient currency, which can supplement the lack of strong currencies such as the US dollar and the British pound. On the other hand, it can also be an asset, replacing some US dollars or other assets in everyone’s asset allocation.
Rather than arguing whether bitcoin or other cryptocurrencies are good or bad for the dollar, SBF believes that cryptocurrencies provide an alternative trading system that can put pressure on national currencies whose functions are underserved and change. Another set of alternatives for the people.
In short, for monetary systems such as the US dollar and the British pound, cryptocurrencies may be complementary to the monetary system, but at the same time, cryptocurrencies will also replace some of the fiat currencies that have insufficient monetary functions.
SBF said: “You can see that some fiat currencies are doing pretty badly because of decades of mismanagement, and I think it’s these countries that will need a more stable, more store-of-value currency. So I think cryptocurrencies are like an alternative to these fiat currencies, providing an efficient trading system.
It is unclear what the future of cryptocurrencies will be like, but what is known at the moment is that the market maintains a positive attitude towards similar explorations. And for now, the current cryptocurrency system is still the mainstream of the market, and this will continue for a long time until we have more disruptive, market consensus new technologies and new solutions.
In this context, as the hardware support of the system, there will of course be more and more participants in the ASIC mining machine industry.
Post time: Jul-26-2022