Law professor says Steamboat public crypto isn’t worth the hype

Cryptocurrency, like many hot-button issues in the US, can get mixed reactions. Some believe it is the future of global trade, while others believe it is a scam.

As part of the seminars at the Steamboat at Strings Pavilion on Monday, July 25, Lee Reiners, CEO of the Duke Global Financial Markets Center, explained the rapid rise of crypto, why he thinks it’s a risky game, and how currency can evolve technologically .

Reiners, a professor at Duke University School of Law, had worked at the Federal Reserve Bank of New York for five years. In his talk, “Cryptocurrency: The Future of Money or All Hype?” he explained the problems and potential of crypto technology.

To start the talk, Reiners asked the audience who had owned cryptocurrency – a smattering of attendees raised their hands. He then asked how many in the audience would “never ever consider owning cryptocurrency.”

Laughing, a majority of the audience raised their hands. Reiners explained that cryptocurrency generates a lot of buzz but can be a polarizing topic.

He explained that the rise of cryptocurrency occurred in the context of the 2008 financial crisis.

“The first Bitcoin transaction occurred in January 2009, and the first transaction included a reference to a British newspaper article headlined ‘Chancellor on brink of second bailout for banks,'” Reiners explained. “Now this tells you something about the environment in which Bitcoin and cryptocurrencies came into existence.”

“This was in the middle of the global financial crisis, when trust in banks and government institutions was at an all-time low, and so it was really libertarians and anti-government types who were the first to be attracted to cryptocurrency and sustained it for the first couple of years , he said.

This sentiment has persisted in the crypto community today, Reiners added.

“That’s one of the reasons why the crypto sector is so resistant to any meaningful form of regulation,” he said.

This decentralized ethos was built into the programming for Bitcoin and blockchain technology specifically, Reiners said. Blockchain is a kind of digital ledger where transactions or the chronological history of something of value can be posted publicly.

“I should note that blockchains are worse than a traditional database across almost every dimension. They’re slower, they’re more energy-intensive, they have worse user experiences, they’re hard to manage,” Reiners explained. “But these are all structural trade-offs that result from the primary design goal of blockchain, which is decentralization.”

This decentralization, Reiners said, makes it difficult to prevent bad actors or illegal transactions using cryptocurrency.

“It’s really an illegal activity and the enthusiasm of techno-libertarians that kept Bitcoin going for the first couple of years,” he said.

All this changed in 2017 when Bitcoin and crypto entered the wider public sphere. Hype and excitement around the currency spread quickly, helped by social media and internet communities.

Reiners explained that this led to a crypto-bubble, similar to the dot-com bubble of the late 90s, or mortgages until 2008.

Reiners explained that people believed that the fixed supply of Bitcoin would mean that it retained its value. But there isn’t a consistent or traditional way to determine how much value there is to a Bitcoin, making it a particularly volatile currency.

“You’re left with an asset with no fundamentals, trading purely on sentiment,” he said.

“After peaking at $69,000 last November, Bitcoin has continued to fall by over 70%,” Reiners said. “During the same time period, the market capitalization of all cryptocurrencies went from $3 trillion to $1 trillion, a staggering loss of wealth in a very short period of time.”

Reiners explained that the strategy for managing crypto in the US has largely been to “do nothing.” He said he favors more comprehensive regulation of cryptocurrency, but doesn’t see that happening with the current Congress or political climate.

He added that he believes there could be more digital currency – such as a digital US dollar – in the coming years. Reiners explained that cryptocurrency and traditional currencies are bound to change.

“The only thing I can guarantee is that it will develop in unexpected ways,” he said.

The seminars at Steamboat will continue with a lecture entitled “America’s Dysfunctional Housing Market” by Christopher Ptomey at 5.30pm August 8 in the Strings Pavilion.

To reach Katy Pickens, call 970-871-4208 or email her at [email protected]