Bitcoin’s revival shows cryptocurrency ‘is not a fad’: Morning Brief

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Tuesday, August 24, 2021

A ‘maximalist’ vision of bitcoin means every company will be a crypto company.

Oh what a difference a summer makes.

Bitcoin’s (BTC-USD) slow but steady rebound from its spring lows saw the crypto unit top $50,000 on Monday, with the latest move greased by PayPal’s (PYPL) announcement that it would let U.K.-based customers trade in crypto, something U.S. clients had already been offered since October.

It seems like just yesterday (May, to be exact) when Tesla (TSLA) CEO Elon Musk’s off-the-cuff remarks ricocheted across the crypto market, lighting the fuse on a sell-off that eventually dragged bitcoin to its 2021 nadir below $30,000.

At the time, Paul Donovan, UBS Global Wealth Management’s chief economist, declared that the episode served as a “reminder that if one person can dramatically alter spending power, the ‘stable store of value’ criteria of a currency is not met.”

Indeed, skeptics have resorted to a slew of aphorisms and adjectives to describe bitcoin (billionaire investor Warren Buffett prefers “rat poison,” for example). “Stable” certainly isn’t among them, with the digital coin prone to dramatic, occasionally double-digit daily price swings that belie its aspirations of becoming a reliable store of value to rival the U.S. dollar.

The latest move punctuates a particularly busy period for the digital currency, and crystallizes something that even its biggest critics have to acknowledge. Cryptocurrency in general, and bitcoin in particular, has been gaining major currency (pun intended) across sectors.

PayPal’s decision is “a sign that every company will eventually be a crypto company — they just don’t know it yet,” Meltem Demirors, chief strategy officer at CoinShares, told Yahoo Finance Live in an interview on Monday. “And I think this trend is just getting started.”

She was only half joking. In addition to the PayPal move, Wall Street is making crypto increasingly available to its clientele, while Facebook (FB) is also making its own ripples in the sector (albeit with a scaled-back version of its original grand design). Separately, trading platforms are clearly reaping the benefits of transacting in crypto (looking at you, Robinhood (HOOD)).

“Crypto’s not a fad. There are elements of this, certainly, that feel a little speculative and bubbly… but if we zoom out and look at the secular 10-, 20-year trend… we view crypto as a fundamental enabling component of this new digital world,” Demirors added.

It cuts to the heart of what noted bitcoin evangelist and crypto investor Anthony Pompliano wrote in a letter to subscribers on Monday. Waxing poetic about how digital currencies were ushering in a “monetary revolution,” Pompliano laid out a vision in which maximizing the use of crypto (i.e. “maximalism”) will eventually make prices far less whipsaw.

“The crazy part is that if monetary maximalism ends up playing out how I believe it will, bitcoin will eventually be incredibly stable in value. The price of goods and services will be denominated in bitcoin and the average bitcoin holder won’t see any level of volatility,” Pompliano wrote.

“When this occurs, people will have a choice to simply spend less than they make in an effort to save bitcoin. Or they will be available to invest in other assets to acquire more bitcoin than what they would simply be allowed to save,” he added.

To be certain, bitcoin’s frothy price and lack of convertibility in the most quotidian transactions (think paying rent, buying coffee and dining out, for example), leaves a lot to be desired for the average citizen. And polling suggests they are still not true believing acolytes like Pompliano and Demirors.

Yet the digital coin’s resilience is nothing to sneeze at. With all due respect to the Oracle of Omaha, its growing credibility among large and small investors is a sign of its maturation, according to Chris Kline, COO and co-founder of Bitcoin IRA.

“The widespread adoption of crypto ranges from governments to major corporations, further legitimizing the seriousness of digital assets,” Kline told Yahoo Finance in an email.

“Make no mistake about it, the world wants crypto to stay. In addition, you’re seeing the adoption of crypto for use in payments, real estate, and art, which are contributing to the rising value of digital assets,” he added.

By Javier David, an editor for Yahoo Finance, is filling in for Myles Udland, who will return tomorrow. Follow him on Twitter: @Teflongeek

What to watch today

Economy

10:00 a.m. ET: Richmond Fed Manufacturing Index, August (25 expected, 27 in July)
10:00 a.m. ET: New home sales, month-on-month, July (3.6% expected, -6.6% in June)

Earnings

Pre-market

6:30 a.m. ET: Advance Auto Parts (AAP) is expected to report adjusted earnings of $3.03 per share on revenue of $2.65 billion
7:00 a.m. ET: Best Buy (BBY) is expected to report adjusted earnings of $1.87 per share on revenue of $11.55 billion

Post-market

Politics