The word ‘rollercoaster’ almost does not do it justice. Over the past 18 months, the cryptocurrency space has almost reinvented itself.
Crypto began the year 2020 still in the relative fringes of global society and international finance. Since then, it has been catapulted into the mainstream: crypto markets reached new highs, followed by significant crashes; everyone and their mother bought a little bit of DogeCoin, and the New York Times declared that “we’re all crypto people now.”
Finance Magnates sat down to talk with Miko Matsumura about Bitcoin, the rise of DeFi, and how the cryptocurrency space has evolved over the past year. Oh yes, and honey badgers. Miko Matsumura is the Founder of the Evercoin cryptocurrency exchange and a General Partner with Gumi Cryptos Capital. He is also a prolific advisor and investor across the cryptocurrency space.
How Will Inflation Affect Bitcoin over the Long Term?
“It’s been a really interesting year,” Miko said. “We’ve seen a second all-time high, and we’ve come off of it.” The crypto space’s first all-time high took place at the turn of the year between 2017 and 2018. “These are really interesting cycles to watch,” he continued, adding that “These ‘wavelets’ [of highs and lows] will continue to accelerate.”
At the same time, there has been an important shift in the way that people perceive cryptocurrency. For example, “We’re no longer in the mood where it’s easy for people to say that Bitcoin is going to go to zero. [We can see that] it’s not doing what tulip mania did. So, you know, I think we’re all pretty confident that this is a pretty big thing.”
Additionally, “Bitcoin has achieved its killer application as a reserve asset. It’s a store-of-value.” Indeed, in the face of rising fiat inflation, more people and institutions have reportedly turned to BTC as a way of preserving the value of their assets.
The current year-over-year inflation rate from 2020 to 2021 is roughly 5.5%. However, Miko pointed out that inflation may be much worse than we realize: “People who are measuring inflation may or may not be measuring it in a particularly accurate way…the primary economic indicators are a little bit off,” he said. After all, “25% of all US dollars in circulation were printed.” Additionally, “We’re seeing certain segments where things have skyrocketed in terms of price,” like housing, fuel, healthcare and education.
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How will BTC react to the rising tide of inflation? “[We’ve established that] Bitcoin doesn’t go to zero,” Miko said. “So the question becomes: what does it do?”
The Bull, the Bear and the Honey Badger
This is where Miko introduced the concept of the ‘third Keynesian animal spirit’.
“John Maynard Keynes talked about the bear and the bull,” he explained, the bull of course, being the spirit of a strong and rising market, and the bear symbolizing a falling market. What is the third spirit? “The honey badger,” Miko said.
What does the honey badger represent in this context? “It’s sort of antagonistic and perverse,” he explained. “In a sense, it’s sort of exemplified by things like the GameStop saga: it takes people’s expectations and wrecks them.”
This is still a market force that is at play in crypto. “Uncorrelation is a property of this emergent asset class, in a way, it’s kind of filled with aggression.” This is evidenced in the way that cryptocurrencies sometimes move in comparison with other markets: “If you think about statistical decorrelation, things that are truly decorrelated are actually sometimes correlated, and sometimes uncorrelated. If something anti-correlated, doing the exact opposite, then it’s actually correlated.”
Signs of Maturation in Crypto
But beyond this ‘honey badger’ spirit, Miko pointed to another wild phenomenon that is increasingly apparent in crypto markets: maturation.
“One of the recent happenings that was quite favorable for the industry as a whole is that crypto influencers have essentially been banned from TikTok. The platform has decided that it doesn’t want to kind of contribute to market manipulation.”
TikTok’s decision may have been based on events that took place earlier this year. “Obviously, we saw Robin Hood getting fined for [its role in the Gamestop saga], so I think we are seeing some regulatory action and increased pressure on organizations.”
“We are seeing increased regulatory scrutiny, which I actually think decreases these kinds of [volatile] tendencies in a good way.”