Crypto: from speculative asset to a new financial system

Something quite important is happening in cryptocurrency, and it is easy to miss if you spend too much time watching the price of bitcoin.

For most of crypto's relatively short history, the discussion has been dominated by price. Bitcoin goes up. Bitcoin crashes. Ethereum rallies. Ethereum collapses. Somebody launches another token. Somebody loses a fortune. Somebody else makes one. Regulators complain, exchanges fail, markets recover and the cycle begins again.

That world has not disappeared. Crypto remains volatile and, as the latest market turmoil demonstrates, bitcoin and Ethereum can still behave more like speculative risk assets than money. We have seen plenty of examples where a change in interest-rate expectations, equity markets or global risk appetite sends crypto sharply lower alongside everything else. Indeed, one of the interesting developments of recent years is that crypto has become sufficiently integrated into global markets that it increasingly reacts to the same macroeconomic forces as other financial assets.

But, underneath all of that noise, something much more interesting is happening.

Crypto is becoming finance or, perhaps more accurately, some of the technologies developed by crypto are gradually becoming part of the infrastructure of finance.