CNBC's Delivering Alpha Panel Hosts Circle and Digital Currency Group CEOs:

Jeremy Allaire and Barry Silbert Tell CNBC, Crypto “As an Asset, it is here to stay”

The CEO of Circle and Digital Currency Group, Jeremy Allaire and Barry Silbert respectively have recently shared their views on the future of cryptocurrencies, the associated problems and what is likely to happen to Bitcoin in the year to come. While both leaders have their own perspective on the matter at hand, the two seem to agree on one thing: this relatively new asset class will have a lot to offer, possibly even replacing some of the traditional ways things are done today.

Prior to getting straight to the questions, CNBC’s Melissa Lee asked the audience what they believed bitcoin’s price would be like, specifically asking whether it will go to zero or reach an all-time high of USD $25,000. It seems that many of participants still remain confused, while some openly raised their hands to seeing it fall to zero or rise to USD $25,000. The latter is also the hope and belief of Allaire.

Investor Cases on Cryptocurrency

Jeremy Allaire sees the crypto market and its associated technology as one that is a:

“fundamental, technical breakthrough- we now have the creation of secure […] and open public record keeping systems and these are immutable record keeping systems.”

He also emphasized on its ability to revolutionize current practices, in particular, breaking down how data is organized, and transactions are done.

Silbert, however, started his argument by addressing the general public. He trusts that the foundation of getting involved in the technology at hand requires curiosity, and one’s willingness to inform him or herself via discussions and simply questioning to rid one of doubt. He also broke down the opportunity into three types, which include, “the store of value opportunity, movement of value around the world opportunity and the ledger opportunity” and with its success comes the possibility of receiving “a lot of alpha”.

An interesting argument Silbert makes is that of the current use of fiat money and where it will be tomorrow. In particular, he said:

“The way that money exists today is not permanent, […] maybe central banks don’t have all the answers, and for the next generation of investors, gold is not going to be a core component of their portfolio.”

Investor Cases on Blockchain Technology

As for the technology in place, Allaire is interested in what the technology has to offer more than anything else. He sees it in a two-fold:

“One – these are new global computing infrastructures, which can be used to run a number of applications for business and finance (bets on new computing infrastructures). Second set of bets is on projects built on top of those.”

He trusts that with the funds raised, projects are now moving into the R&D phases, which can be considered as an indicator of the opportunity at hand, and how it will influence the number of players within society – be it from a consumer, merchant, or governmental standpoint.

Silbert gave the example of BitPesa, a payment provider, to illustrate the difference between current cross-border payment systems and what the blockchain technology is capable of doing. In the traditional system, the fees attached come out to about 10 percent, however, he makes the case that with BitPesa, “you can now move money instantaneously at 80 percent cheaper.”

Allaire also revealed that Circle is “working towards tokenizing the US dollar”, dubbing the coin as the USDC, which will allow “you to have a bare instrument that you will be able to transmit to any internet-connected device in 10 seconds with no cost and high level of security.”

Furthermore, he clarifies that the new system uses codes as the choice of language as opposed to English, where the former is more likely to “represent different things” and bring a positive influence on a broader scope.

Crypto Projects, their Lifespan and Overall Value

With the crypto sphere continuously being introduced to a wide range of projects that claim to resolve unique issues, both Allaire and Silbert trust that approximately 90 to 99% of the projects are likely to go to zero, with the latter believing in only as little as five projects for long-term purposes.

Silbert tells “Bitcoin is going to own the digital gold use case”, however, he adds that “we are far away from that happening,” because more work needs to be done to bring some shape to the market. Some examples he offers include the need for a “larger market cap, more liquidity, on and off reps and regulations.”

Allaire seems to have focused on crypto prices when asked the question about which projects are likely to strive among the several. More specifically, he shared that:

“when demand grows for that kind of fuel [commodity-like asset], then you’re surely to see the price correlation for the apps built on top of it.”

Is Now the Right Time to Invest in Cryptocurrency?

When asked the question as to whether or not it is the right time to invest, both CEOs, in some occasions shared similar views, but at the same time, had some differences in their respective investor case.

Silbert mentions the endless possibilities with the crypto space, as he trusts that “as an asset, it is here to stay.” He describes the “amount of innovation and investment and awareness that now exists” to be the start of the acceptance of a decentralized system or form of money.

Allaire thinks:

“what people are missing is that it is the new infrastructure of the internet, the last major infrastructure layer of the internet was built over the last 20 years and […] the blockchain technology is a public infrastructure […] and will replace from communication to trusted transaction.”

He sees this type of investment opportunity appropriate for those who have faith in the infrastructure of the internet. A sound comparison he made here, even stunned Lee, as he sees many people today regretting the opportunity to invest in the HTTP protocol or any other related types.

Clearly, Allaire is for how the technology will evolve, while Silbert sees the blockchain in the present, that is, in terms of the “store of value, digital money of things.” While he did agree with what Allaire noticed, Silbert thinks his views lean more towards, “a multi-decade evolution”, while his own reflect “how do you make money today?”

The Barriers for Institutional Investors Today and How They Should be Removed

Both Allaire and Silbert do not necessarily believe that there are too many barriers for institutional investors. However, Barry said, “let’s solve the custody, let’s have the trading systems in place, I don’t want to be first, I want be a fast follower, but I don’t want to be first.” This shows that many, like himself, are hesitant to plant the seed that could potentially result in a developed industry.

Allaire, conversely shared that he’s seen “a pretty major wave of instituitions who have onboarded” with Circle “in the past quarter/quarter-and-a-half.” He also added that there’s “a lot of housekeeping” that needs to be done and that there are many institutional investors out there ready to invest but choose to “sit on the side lines […] People are waiting for the bottom, so they can time the market.”

Whether Bitcoin has hit its bottom or not

Silbert is still expecting the price to drop. He openly stated that he:

“expects another 80 percent top-to-bottom correction […], which is great for the stomach and a lot of people are waiting for that – volume petered out.”

Another interesting point he made is that, “while positive headlines have impacted the prices,” negative headlines did not hit the market so hard.

As for Allaire, he does not seem to have given a clear stance on whether or not the giant will continue to fall, but instead focused on elaborating on what he believes people are expecting. In particular, he said that:

“I think there’s been a view that people want licensed, regulated entities that are operating within that framework of traditional securities law and see those licensed granted, even though that’s not BTC or ETH per say, I think there’s a desire to see capital market protection exist for investors in the market.”

He also praises the efforts currently in-the-making, as he sees the SCC, CFTC and FINRA trying to understand the market to see what can be done so that “markets and investors are protected” from illegal activities. To him, this is an indicator that the asset class will open up some more.

Does Supporting Cryptocurrencies Mean Fighting Against Regulators?

Lee gives the example of the Chairman of SEC, Jay Clayton, who remains skeptical about Initial Coin Offerings (ICOs), as well as Jay Powell, who only sees the negative side to cryptocurrencies (i.e. a great mode to conduct money laundering and the dark web).

This led to the question, as to whether or not those who support blockchain and cryptocurrencies are budding heads with regulators, Allaire was quick to respond, “The fed is asleep on the wheel on this.”

Silbert felt it was necessary to reflect on what the naysayers have to say. In particular, he said:

“there’s very little evidence that its used for illegal activities, and he’ll [the chairman of the fed] learn that the innovation and efficiency that this can drive far outweighs risks around that and he’ll learn the hard truth that it can’t be shut down.”

He also adds that:

“around the world, governments have grown comfortable with this and are trying to create a safe place for innovation to happen.”

Cryptocurrencies A Year from Today …

Silbert trusts that “a year from now, the conversation will be around what’s the appropriate allocation class and how do you deploy the money,” implying that questions like is it here to stay or which one will surpass others will no longer be of significance.

Similarly, Allaire trusts that 2019 will be the year to have:

“discussion on all the use cases and applications of the technology […] across a lot of recordkeeping industries and how it [blockchain] is going to change this.”

Do you think it’s right for Silbert to say that there’s little evidence of money-laundering activities through the use of cryptos? Who’s view do you side with the most? Silbert’s present investment opportunity or Allaire’s development of blockchain and what it will replace over the long run?

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