Bitcoin has increased. What are the crypto true believers still smoking? | Nils Pratley

When fraud and conspiracy charges were brought against FTX founder Sam Bankman-Fried in the US on Tuesday, a funny thing happened to the price of bitcoin: it went up.

Since bitcoin remains a handy barometer of sentiment throughout the crypto universe, one has to assume more than a few punters saw headlines about “one of the biggest frauds in American history” — the U.S. Attorney for the Southern District of New York’s description of Bankman-Fried alleged crimes—and decided that this was just the moment to step up the stakes.

Bitcoin has still plunged in value by almost two-thirds this year, it should be said. But it’s also up about 10% since the downturn when FTX filed for bankruptcy in mid-November, which is extraordinary. One has to wonder: what are the crypto true believers still smoking?

A popular narrative says that a few crashes (to understate the significance of FTX’s failure) are only to be expected in the early years of a decades-long financial revolution. The odd trading exchange may disappear, but hey, the most popular digital tokens should survive. And when regulators eventually impose a few rules on crypto’s Wild West, mainstream respectability will be assured, the theorizing goes.

This cheerful spin sounds delusional. Regardless of whether Bankman-Fried is convicted or not, FTX looks like an existential event for the crypto trading fad. As real-world mediums of exchange for goods and services, none of the digital tokens have achieved repeal, except for their use in “terrorist financing, tax evasion and sex trafficking,” as JP Morgan CEO Jamie Dimon put it. CNBC last week.

As stores of value in times of inflation – the idea of ​​”digital gold” – they have flopped. And of course they do not provide any income. That leaves cryptocurrencies as tools of pure speculation, a pitch with limited appeal if it is proven that $8 billion worth of customer assets are missing from FTX.

Yes, the steady smack of regulatory discipline may eventually force the establishment of exchanges with proper governance structures that follow know-your-customer rules and do not intertwine their operations with hedge funds or loan funds. By then, however, one suspects that the get-rich team will have moved on to something else. Tulips were great until they weren’t.

The underlying blockchain-based technology should still have useful financial applications, it’s usually obligatory to point out, but Bankman-Fried’s downfall feels like the moment when grown-up thinking re-enters the room. “Crypto is a complete sideshow” and crypto tokens are like “pet rocks,” Dimon also said last week. It was a boring and conventional thing for the boss of a major bank to say, but also probably right. A new asset class, as we usually use the term, has not been created.

Good luck to the buyers and holders of bitcoin at $18,000, but you have been warned (again).

A big idea flourishes from small energy savings

A saving of £2.8 million is small in the context of the many extra billions that British households will spend on energy this winter, but good ideas can have small beginnings. National Grid’s ‘demand flexibility service’ – the scheme to incentivize us to use our tumble dryers and other appliances off-peak – is one such innovation.

The company, as the operator of the electricity grid, only ran a series of limited trials to establish that the flexibility setup works – hence the small number. But the response from consumers seems to have beaten expectations; and the fact that 1 million households and businesses have signed up to take part in a wider rollout suggests there is an appetite to save a few quid.

From the network’s point of view, the scheme is about shifting demand to meet supply. There will clearly be limits to how much balancing and fine-tuning can be achieved in practice, and the job of setting financial incentives may turn out to be more art than science. But it all sounds like a burst of common sense, as well as being a small return on the horrendously expensive rollout of smart meters.

It’s just a shame it took an energy crisis to make it happen. Proper national isolation would provide a far greater improvement in energy efficiency, of course, but that is not the Grid’s view.