Bitcoin education accelerates adoption, lowers volatility: Ben Caselin, AAX
Bitcoin’s price is back above the US$23,000 mark after a prolonged fall this year that saw the cryptocurrency hover around US$18,000 last month. In another bit of brighter news, the total cryptocurrency market capitalization has managed to climb back above $1 trillion.
While the 2022 crypto price crash may have hurt confidence in Bitcoin and cryptocurrencies in general, global crypto exchange AAX and US-based Forrester Consulting have a different view.
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They have released a report titled Bitcoin in Emerging Markets which aims to show Bitcoin’s usefulness in different markets beyond just being used as an investment vehicle. Discard his Danny Park spoke one-on-one with AAX’s Ben Caselin at the launch event for the report on Bitcoin adoption and its future.
The interview has been edited for language and brevity.
Danny Park: Your Biggest Worry About Bitcoin?
Ben Caselin, AAX Exchange: I’ll switch it around. I think when we look at Bitcoin, we have about 10 years of culture, and while at the beginning you can say in the decade of its rise, you know, it’s good to have such a focus on price and such a focus on potential gains that you can make. But now that we’re in this decade of adoption, and especially as we see uptake accelerating in emerging markets, I think one of the biggest obstacles to Bitcoin’s growth is focusing on growth. I know it sounds really weird, but we should just focus on the impact it can have and on the use case it can have. And basically the market will come to its senses afterwards. It is really changing that perspective that we have to do now.
Park: A growing number of developing countries officially support Bitcoin – were they too hasty?
Caselin: So I think it is very important that we ask ourselves the question, how long does it take for a central bank to change its policy, or how long does it take for a country to build up or upgrade its national reserves? And I think the answer is probably years. It takes years.
And yes, there are some downsides. El Salvador and some other countries have placed Bitcoin on their national reserves. I would say if that’s your policy, countries will usually have multi-year policies [to see results]. And maybe in five to ten years we might be able to say whether that decision was timely or not. What is timely, however, is to look at, say, the track record of something like the Turkish lira or the track record of the US dollar or the track record of the Venezuelan bolivar. They have many years of track record, and it’s not a very good track record. So I think those are the things that we should focus on now and, you know, review El Salvador’s decisions that we can do in a decade or so.
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Park: What are your motives for making Bitcoin an official currency?
Caselin: There are various motives for this [different] country, for example El Salvador. It was also to reduce dependence on the US dollar, which I think is perfectly fair for any sovereign nation to have that kind of independence from an external central bank.
For a country like Congo, I see it not only as a way to actually build economic inclusion for the population, to promote economic inclusion. But then again, it’s still an independence game. It’s still something we have to see in a place like the Congo as a very dispersed population with some very vibrant urban centers. Not many people have access to a bank account. How do you send money to your family in a village, who might have a phone connection?
I want to say that as we all know, Congo is one of the richest countries in the world if we look at the resources and it is one of the poorest countries in the world if we look at the economy and the position in the global economy. I think there are many reasons for Congo to innovate.
Park: How is education driving Bitcoin adoption around the world?
Caselin: Education is important to reduce volatility over time. Why? Because more people are coming in, distribution is generally good for countering the volatility and the price swings, but it’s also about the education that makes people panic less about price movements, because if you’re in it for the right reasons and it’s less price-focused, then The price won’t scare you that much either.
And so how do you educate people in emerging markets or anywhere? It’s just having just a conversation like today where you explicitly say, for a moment, let’s not focus on price, but instead and not just say like, oh, let’s focus on fundamentals or let’s focus on utility. These are all buzzwords. Let’s just focus on impact and what it means to people in their daily lives and recognize that context. You know, they have different contexts. And that means that Bitcoin, the expression of Bitcoin, the use of Bitcoin is different everywhere.
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Park: Will Bitcoin Re-emerge as an Inflation Hedge?
Caselin: So first of all we have to ask some questions. Number one, whose inflation?
We have to look at which countries, which places. In emerging markets, I think Bitcoin can certainly be used as a hedge against inflation. In the US, I think we have to be very honest with ourselves and understand that a lot of the narrative around inflation in the US is really more of an expression of the concerns of institutional investors who care a lot about inflation and who care about buying government bonds.
Your everyday American cares about purchasing power. Your everyday American will not care about government bonds. So I think this hedge against inflation talk is a bit over the top. I think if you don’t like your money, then maybe we should just get rid of it, instead of always hedging against it. Maybe it’s just a bad kind of money. And so I can’t think of a single fiat currency that has actually performed very well in the last 100 years. Even your Swiss franc, even the Japanese yen, is full of problems.
Park: What is your outlook for the current bear market?
Caselin: I mean, no one can predict the future, but the way I look at it is that I think during this time, during this kind of price action, there’s a lot of reasons to say this is okay. And if it is extended, let’s say two years, it will actually be very good for emerging markets. That would be very good for adoption, very good for distribution.
And if before then people realize that this is a great form of money and we should have more exposure to it because it adds value to emerging markets and institutional investors who are concerned about inflation, then we will have upside. And I think that’s great. It gives good feelings to everyone, but it is not sustainable if it goes too fast. So tomorrow a million dollar Bitcoin is not sustainable. And even I’m a big fan of Bitcoin and I want to sell because it’s not sustainable.
Park: Have crypto and Bitcoin markets paid the price due to contagion from the Luna collapse?
Caselin: So I wouldn’t say that all of this is due to infection. Let’s not forget that Netflix went down 75% and it’s not like people didn’t watch movies because 3AC went down. It is a cross capital market event. It is a major liquidity event. It’s a change in policy from the Federal Reserve, change in fiscal policy. There are so many factors that come into price at the moment that I wouldn’t say it’s just contagion.
The infection is not actually the cause. It is actually just handed down, unsustainable financial engineering that is not yet able to withstand market stress. Why was there market stress? Not because Luna went down. That is not the reason.
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