  Exploring the transformation of value in the digital age By Michael J. Casey, Chief Content Officer Dec. 10, 2021 If you were forwarded this newsletter and would like to receive it, sign up here. Sponsored by 
There was a cryptocurrency-focused hearing this week in the U.S. House of Representatives and it was, surprisingly, cordial. It gave the impression that Washington's lawmakers have done their homework and are starting to accept the reality that this technology is here to stay.
So, it's frustrating that D.C.-based policy wonks like Matt Stoller, whom I otherwise admire, can be so predictably dismissive of the crypto sector. This week's column tries to examine the logic of the reflexive negativity of "thought leaders" in Washington and other centers of financial policy influence.
At least this week's podcast is framed around a more accommodative mindset. Nikhilesh De, CoinDesk's managing editor of global policy and regulation, joins the World Economic Forum's Sheila Warren and I to discuss the surprisingly upbeat congressional hearings and figure out what they say about the future of crypto regulation. 
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What Matt Stoller Gets Wrong  Rachel Sun/CoinDesk "Yes, Web3 is a bunch of bullshit. The problem is, compared to what?"
That subhed to Matt Stoller's newsletter this week set me off even more than the headline, which read, "Cryptocurrencies: a Necessary Scam?"
To be clear, my issue isn't with the all-too-common grammatical slip in the comparative. (Hint: Matt, please review Shakespeare and the difference between "compare to" and "compare with.")
No, what got me was the "yes" in Stoller's statement. It was a wink to the intellectual elite, as if to say, "Don't worry, it's okay to acknowledge that those crazies in the crypto community, while possibly well meaning in their critique of broken political-economic order, are, yes, Kool Aid-drinking cultists."
It was especially galling because I'd been scheduled to join Stoller on Peter McCormack's "What Bitcoin Did" podcast this past weekend, with a format that Stoller suggested we describe as "convince Matt Stoller." Scheduling conflicts meant I couldn't make it. I guess he remains unconvinced.
It also stung because I'm a big fan of Stoller, a leading light in the so-called Hipster Antitrust movement who is closely aligned with Lina Khan, chairwoman of the Federal Trade Commission. Stoller's book Goliath is a must read on why we must confront monopoly power to protect democracy and long-term prosperity. In so many other respects, his worldview aligns with mine. He's a believer in free, open, competitive markets and, most importantly, that it's necessary to prevent excessively powerful gatekeepers from manipulating and distorting those markets. In an age when dominating internet platforms have forged an insidiously destructive system of surveillance capitalism, Stoller's writings – found in his BIG blog/newsletter – have done much to focus our attention on why society needs to act on this, now more than ever.
Where we clearly disagree is on whether cryptocurrencies and blockchain are a viable mechanism in the digital age for executing on that. |
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Off the Charts
Bitcoin's Domination on the Wane
This past week wasn't a happy one for crypto investors. Bitcoin (BTC) got hit by a wave of selling on Friday and early Saturday that saw it lose 27% in less than a day. As is often the case, other assets, including Ethereum's ether (ETH), sold off sharply in tandem with bitcoin.
But the more interesting aspect is that ether, as well as other tokens suchs as Binance chain's BNB, did not perform as badly as bitcoin – to the point where the losses seem relatively pedestrian. The result: a much-followed measure of the makeup of the total crypto market capitalization known as "bitcoin dominance" has dropped to rarely seen levels. On Friday morning, following a renewed sell-off in bitcoin, bitcoin's weight in the total crypto market cap was hovering just above 39%, according to CoinGecko. That put it on the cusp of breaching a low posted on May 19, which would bring it into three-and-a-half-year-low territory. The next target would be the all-time low of 32.4%, posted on Jan. 14 , 2018.
Why does this matter? Because the circumstances behind the collapsing BTC dominance measure feel quite different from those of the 2017-2018 initial coin offering (ICO) bubble, when those historical lows were hit.
Then, the initial drop was fueled by demand for ETH, as the token frenzy around ERC-20 tokens issued as ICOs on top of Ethereum forced investors in those offerings to buy the underlying platform's currency, generating a brief conversation around the prospect of a "flippening," where ETH's market cap would one day exceed that of BTC.
That frenzy fed a wider retail demand for all tokens, which in turn drove up bitcoin, albeit at a slower pace than ether. But when doubts began to rise about the sustainability of token prices, compounded by fears that the U.S. Securities and Exchange Commission would take actions against ERC-20 issuers, big investors rushed to take profits on the entire crypto ecosystem. At first, that led them to bitcoin, the indisputably most liquid cryptocurrency. As a result, a declining BTC dominance metric went from low to lower.
It wasn't until the dust settled and steady-minded investors took stock of the situation, that they realized that bitcoin was a safety bet.
Fast forward to 2021, a year of phenomenal growth in the Ethereum ecosystem, one this time driven by decentralized finance (DeFi) and non-fungible tokens. And as we enter December, when the broad market capitalization is dropping, it doesn't appear these new market areas are a factor in the correction. Rather, the sell-off is driven by macro concerns about the outlook for interest rates, due to more hawkish commentary from the Federal Reserve. That has hurt all risk assets, including the most popular one among institutional investors, bitcoin, which is bearing the brunt of Wall Street's exits. The sell-off really has nothing to do with DeFi or NFTs, which is why ether is holding up so well, relative to bitcoin.
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The Conversation
Mongoose Coin vs Hamster Coin
Illustration: Rachel Sun/CoinDesk
I want to believe that Rep. Brad Sherman (D-Calif.) knew all along he was going to create a meme coin.
Check out the video of the unrelenting crypto critic during this week's hearings before the House Financial Service Committee, where he says the "number one threat to cryptocurrency is crypto," because "bitcoin could be displaced by ether, which could be displaced by doge, which could be displaced by hamster coin, and then there's cobra coin and what could mongoose coin do to crypto coin?"
Sherman is captured by the flawed notion that X coin is worthless because at any day someone can quickly deploy Y coin to displace it. It's an argument that betrays zero understanding of the massive commitment from developers, miners, investors and general believers that's needed to turn a coin into the kind of lasting success that bitcoin and ether have become.
Still, the fact that it's impossible to magically conjure up those qualities in a way that is lasting and meaningful is irrelevant now. What matters is that – of course, who didn't see this one coming? – Sherman's comments were treated as a call to action by crypto pranksters.
Arise, Mongoose coin.
There's an expression of support.
And, voila!
Inspired by a crypto-hating Congressman from California, Mongoose coin now exists, proving his point that anything can be spun up immediately in this space - but not much else in his statements.
Still, the new creators of Mongoose coin wouldn't have it any other way. They offer credit where credit is due:
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Relevant Reads
Market Meltdown
As we said: Not a good week for bitcoin.
- Here's Nikhilesh De and Omkar Godbole recounting how the most dominant cryptocurrency dropped a whopping $9,000 in the early hours of Saturday morning and how, of all players, the government of El Salvador saw fit at that time to buy in.
- Here's Daminick Dantes and Tracy Wang describing how other "dip-buying" traders gave bitcoin a bit of a reprieve midweek.
- Things worsened again toward the end of last week, which made Lawrence Lewitinn's take on things more important. In it, he argued that all the warning signs were there in the market early on to signal a bitcoin sell-off.
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Money Reimagined
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