Welcome to episode 19 of Understanding Crypto, the podcast where James Burtt and Paul Abercrombie demystify the world of Web 3.0 and cryptocurrency, as well as what it means for you and your business. In this episode James and Paul go over the current market sentiment according to mainstream media, and juxtapose it with what's actually going on in the cryptocurrency world.  

A Decrease in Net Worth

The current sentiment across mass media when it comes to Bitcoin and cryptocurrency is that investors are losing their savings and that Bitcoin doesn't have the potential to last. James and Paul offer an alternative view. "If you've benefited from the upside [of investing in crypto] and those assets have gone up in value, … and they're now down, I can almost guarantee - unless somebody has spent £100,000 in crypto investments in the past four or five months - that they're pretty much probably where they were at the start," they tell listeners. There is a difference between holding all your money in crypto assets, and investing a portion of your net worth into crypto. In the event the market value falls, the outcome and effects of these two decisions will be different. [Listen from 3:28]

55% Increase

While the mainstream media pushes the idea that interest in crypto has decreased due to recent negative news of market crashes, currently in the crypto world, individuals are asking what's next. "It's 55% up on the previous month, and the graph also shows that combined traffic for new and returning users has passed 160,000 people, which is another all-time high," James says. What's happened in the crypto world has not in any way deterred users from wanting to carry on with what they're doing, but in fact has emboldened and spurred them on. When it comes to crypto, you have to know more about what's going on beneath the surface than simply what is being pushed within mainstream media. [Listen from 11:10.]

Regulation Within Decentralization

Paul asks, "In a world where there is decentralization in its truest form, how can one state dictate the rules and regulations around crypto?" There are two sides to this answer. First there is regulation to prevent retail investors from getting involved in sophisticated investment schemes, which could result in the loss of savings and assets. An individual would have to be classed and qualified as a sophisticated investor, that is someone with a high net worth. [Listen from 16:40]

"What crypto gave us the ability to do was to have somebody that wouldn't be classed as that sophisticated investor to invest a small amount of money and benefit from huge gains over a short period of time," Paul says. Sophisticated investors would view these current crashes as merely blips along the way, and short term issues. He adds that crypto itself cannot be regulated, only the activities around it. You can regulate people's entry and exit points into crypto and crypto-related business, but you can't regulate crypto itself. [Listen from 18:04]

Regulation and Stablecoins

The concern individuals have within the crypto world when it comes to regulation is that the big financial institutions around the world that don't want decentralization may accelerate regulations. They may advocate for more rigorous rules that may hinder the crypto industry. [Listen from 21:53]

James and Paul talk about stablecoins and point out that if you're going to class your coin as a stablecoin, you have to prove that it is an asset, and do so as if you were operating in a normal financial market. In terms of regulation, the quicker regulation comes, the quicker crypto can become mainstream. This is because it will quicker answer the questions larger investors, such as hedge funds, have that keeps them on the fence about investing in crypto. [Listen from 23:02]

James itemizes the five questions a prospective investor must ask themselves before they invest in cryptocurrency. These are:

1. Am I comfortable with the level of risk?
2. Do I understand the investment being offered to me?
3. Are my investments regulated?
4. Am I protected if my investment provider goes out of business?
5. Should I get financial advice?  [Listen from 26:04]

Key Takeaways

• There is a difference between holding all your money in crypto assets, and investing a portion of your net worth into crypto.
• When it comes to crypto, you have to know more about what's going on beneath the surface than simply what is being pushed within mainstream media.
• You can regulate people's entry and exit points into crypto and crypto-related business, but you can't regulate crypto itself.

Resources

James Burtt on Twitter | LinkedIn | Instagram | Clubhouse

Paul Abercrombie on Website | Twitter | LinkedIn | Instagram