Guest Editorial by Jon Ungerland, CIO, DaLand CUSO
Bitcoin and crypto are dead, did you hear? They’re crashing. They’ve lost 60% of their value in the last few months! They’re dangerous.
I know these things because a geriatric with flawless hair told me on the nightly news. Janet Yellen and Jerome Powell also said so (in complete objectivity, of course, from their central-banking and money printing lairs … and they’re right about everything, like how they ‘nailed it’ on inflation!).
How’s your 401k doing? Incidentally, Janet and Jerome would prefer you NOT take a look at those!
Anyway, on to some real reporting …
Surprising Survey Results
On June 13th, Bank of America (BofA) released the results of an internal survey of 1,000 customers (digital asset owners and prospective digital asset users). According to BofA, 91% of those surveyed stated they intend to buy cryptocurrency in the next six months. The banking world has been ablaze with this news this week; at least those interested in the future of faster, more secure, more valuable money and payments (as opposed to merely trying to keep the electronic dollar on life support).
The 91% figure is impressive – amazing even. Ask yourself this: If your institution surveyed your membership right now, would you be able to get a 91% “yes” for intent to use channels like online, mobile, phone, bill pay, etc.? As a banking/fintech digital and crypto strategy guy, even I was surprised by this significant affirmative response from the BofA users regarding crypto. Don’t get me wrong. I don’t’ think distributed ledger networks are going anywhere. I’m just shocked by the fact of how “here” they already are in the eyes of what I would consider the “normie of all normies” – big banking customers.
A few strategic and philosophical thoughts on why this statistic is so significant, especially now …
In the wake of the 2008 financial crisis, people built faster, more affordable, more secure, more transparent tools for storing and moving money, value, property, etc. Bitcoin is a successful 13-year-long proof of concept demonstrating that money, value, and assets can be stored, moved, and used globally without reliance on institutions. This presents a problem for institutions, hence my dedication to educating financial cooperative partners about this precarious tech and its inherent application and potential innovative potential for local, decentralized, democratic financial institutions.
What if we’re entering the wake of another 2008-esque financial crisis? What if communities and consumers, corporations and individuals, are about to be crushed by a depressing tsunami of data and personal experiences proving, again, hyper-centralized systems best serve the interest of the few and often undermine the wealth and well-being of the many (via their exclusivity, their opacity, their ability to be manipulated and controlled, their lack of transparency and democratic governance).
I’m asking this question of our community financial cooperative industry because, in my opinion, the BofA survey actually contained more startling data than the spotlighted 91% figure. It contained warnings that indicate, unlike 2008, our consumers and communities have a ready-made technological solution to move beyond banking – networks which are already being used by a critical revolutionary minimum – should our world be presented with another round of evidence that centralized banking isn’t working for their wealth or well-being.
A Deeper Dive into the Survey
Other, more problematic (for financial institutions) figures from the Bank of America survey:
77% of the survey respondents were short term investors in crypto, meaning they’re most likely being negatively impacted by the current downturn (and yet are indicating an intent to move more value out of banking/electronic dollar and into crypto in coming months).
30% of the respondents said they do not intend to sell any crypto in the next six months, supporting a thesis I’ve been advancing for quite some time that consumers are judging these distributed networks and digital assets as viable (better?) long-term stores of value than the electronic dollar. Again, important to note these respondents are saying this during an epic downturn in crypto prices relative to dollar exchange value.
39% of respondents said they’re currently using crypto for online payments, indicating further erosion of your institutional interchange income. It’s a staggering statistic that indicates crypto is entering the utility cycle and is starting to transcend the “speculative investment” or “store of value phase” of its infancy. Chipotle apparently agrees …
34% of respondents already use crypto for person-to-person payments. There goes bill pay and fancy P2P functionality for which you’re likely paying a premium to have connected to your online/mobile banking.
Maybe these alternative digital assets and monies aren’t fad collectible tokens (as legacy news outlets are programmed, oops I mean persistent, to impress upon us). Perhaps they’re next-generation value storage and movement networks – faster, safer, more secure, cheaper (less institutional risk and overhead) and already global in scale. If I’m correct in looking at these as technological tools for nation-state/bank-independent economic innovation, our entire industry is going to urgently need a concerted strategy to speak to the consumer in the wake of another impending central bank, government/corporatist-fueled financial crisis!
Price vs. Value
However, recent analysis by a well-known cryptocurrency and digital assets industry analyst are even more staggering than this week’s BofA validation of these clear trends and risks to money within our industry. On June 15th, one day after Bitcoin experienced an historic erosion of market cap (relative to the dollar), a prominent investment analyst many of your members probably follow on Twitter reported:
“We are watching a divergence. Price and value are completely decoupling right now for Bitcoin. What I mean by that is, price is down from a $69,000 high in November to around $23,000 today. But hash rate hit an all-time high today. The Bitcoin network has never been more secure than it is today. If you look at the Bitcoin wallet addresses with 0.01 Bitcoin, 0.1 Bitcoin or 1 Bitcoin in them, those three have all hit all-time highs. The Lightning Network [merchant payments in bitcoin] capacity is also hitting an all-time high.”
In other words, stop worrying about price (in dollars) of BTC, and get alert about user adoption, transaction volumes, and increasing network scale, security, and payments capacity. Why? Those ARE your business, not controlling the value of an (imploding) dollar.
Bank of America is just waking up to the digital transformation of money. I doubt their exec teams are talking about crypto as a nerd fad or joke about Bitcoin as “the next tulip bulb crisis.” Is your local financial cooperative and/or community banking institution aware of these trends in payments, deposits leaving your institution and heading into distributed digital asset networks? Do you have a strategy, an operational design, and technology to protect a flank – an exposure of potentially 91%?
Sure, Bitcoin, Ethereum, Cardano, XRP, and Luna have all experienced massive downturns in value relative to the dollar. Yes, crypto is probably going through its Dot-Com Bubble moment, just like equities are experiencing the Big Tech Bust. However, less than 10% of the globe had entered the crypto markets prior to the current downturns. Thus, I’d suggest it’s critical, crucial, and existentially necessary to look at the current dollar-value dip through the eyes of that 91%. Is it a collapse, or is it a fire sale?
By the way, how are equities fairing? Haven’t they shed near $10T in value in recent months (in US alone)? How’s the dollar doing? Aren’t we dealing with 40-year highs and unprecedented pressures on what little value remains in our preferred electronic fiat currency? How’s housing looking? We shouldn’t fool ourselves into thinking the legacy ways are safer or better because they’ve been around longer. How’d that work for travel agents, taxi drives, and Blockbuster owners?
The point is members, communities, and corporations are looking for storehouses. These digital asset networks represent the first new asset class in 40 years at a time when communities/consumers are grappling with protecting their wealth from the limp 50-year-old dollar. It’s silly to listen only to the nightly news droning on about Bitcoin price relative to the dollar, and potentially catastrophic to fail to develop a strategy around these emerging financial technology networks now amassing all-time highs in users, transaction volumes, and institutional participants – sure to drive a price spike in the future.
Perhaps there’s some poetry in all of this. As credit unions and financial cooperatives, we allege ourselves to be member owned; run for the member and by the member. Maybe in this case all we need to do is listen to the membership – the 91% of them – and get started on building strategies, educating our executive leadership teams about these new digital money networks, preparing our operations to maintain stewardship of digital money, and use our cores to start processing digital money data, before Bank of America beats us all to it (again).
Of course, we shouldn’t’ just jump hastily into digital assets and crypto. Further, I’m not a fan of just bolting on buzzword solutions and vendors – increasing costs and decreasing operational efficiency. As always, I’d suggest a planned, metered, phased, strategic approach to stepping into this world of data-money. Build the strategy, transform the operations, deploy the tech, rinse, repeat.
Here to help …