Hello everyone,

This is a particularly emotional newsletter for me, as it is the last Crypto Long & Short that will be sent under my name. I have some personal news: After five exhilarating years at CoinDesk, it is time to move on. At the end of June, after a few weeks off, I’ll be joining Genesis Trading, to continue synthesizing why all of what we are seeing matters.

For The Briefing this week, I decided to depart from the original format and share with you my main takeaways from the past five years. It was hard to distill them down into something of readable length, and there will no doubt be much that I regret having to leave out. Maybe one day I’ll do a Part II.

Thank you all so much for being a wonderful audience. I will miss writing for you, but I’m not going far away, and I will probably pop up occasionally here and elsewhere at CoinDesk.

Stay curious, everyone – if you think the last five years were interesting, you ain’t seen nothing yet.

– Noelle

The Briefing: What I’ve Learned in the Past Five Years

There’s an insider joke that isn’t really a joke that a month in crypto markets is like a year in normal time in terms of change. In terms of the passage of time, it feels like a week. So you can understand the difficulty of looking back over five years and picking out highlights from a landscape that is blurred by speed.

You’re reading Crypto Long & Short, a newsletter that looks closely at the forces driving cryptocurrency markets. It goes out every Sunday and offers a recap of the week – with insights and analysis – from a professional investor’s point of view. You can subscribe here.

Distinguishing new knowledge from that which was always known is also a challenge as, in a field that encompasses so many fundamental concepts, learnings rapidly become truths.

So, distilling what I’ve learned as I wind up five wonderful years at CoinDesk is too ambitious a task to even contemplate. Instead, I humbly share just some of the things that popped into my head as I sat down to write this.

1. People don't understand money.

In the early days, the question I most often got from traditional finance people was: “But what backs bitcoin?” I always responded with another question: “What backs the dollar?” The answers I got ranged from “the U.S. GDP” to “the army.” Very few made the connection with the “full faith and credit” that backs government debt, or even with the “In God We Trust” that is printed on the dollar bill. A few probing questions later, most eventually arrived at the realization that “faith” backs the dollar – faith in the U.S. GDP, the army and ultimately the U.S. government. When they get there, it’s just a short step to accepting that a cryptocurrency backed by faith is not such a ridiculous idea.

It always surprised me that the fiercest resistors to this notion tended to be people well trained in economic and investment principles. I should have realized that firmly held notions are the hardest to relinquish. This brings me to the second point:

2. The questions matter more than the answers.

The progress of science is about the search for explanations. This need to understand also gave birth to faith. We can’t build on an “I don’t know,” so if research can’t give us an answer, we imbue higher beings with an omniscience and control that absolves us from needing to comprehend.

This is prevalent in all aspects of life, including economics and politics, and most end up accepting the wisdom handed down over generations and through textbooks. Traditional schooling teaches us to memorize rather than question the answers we are given.

Every now and then, tools emerge that enable us to probe deeper than ever before. Blockchain technology is one of those tools. It forces us to ask such questions as “What is money?” What is consensus? Why does it matter? How far should the authorities be able to go to curtail our financial freedom? Why do capital markets restrict access to opportunity?

These questions are the tip of a multilayered iceberg, and bring us to point three:

3. Our industry needs more philosophers.

It already has some – Craig Warmke and Andrew Bailey are making great contributions; I’m sure there are others – but more would be even better. Understanding the true transformational potential of crypto assets requires some uncomfortably deep questioning of principles we mistakenly assume we understand.

Bitcoin, for example, is a bearer asset – like the dollar bill, you hold it, you own it. Some people don’t see why this is a big deal, others get excited at the reminder. Both reactions are based on an assumption of the right to private property. This has not always been a given in human history, but is something that we all today take for granted. A hundred years from now, what will we take for granted that seems totally far-fetched today? And, of the things we take for granted today, what might we lose?

There are so many assumptions that we don’t even know we hold, but which – when questioned – open up huge vistas of innovation. For instance, many projects are trying to “fix identity.” But what is identity? Who decides? Can society function with each of us deciding for ourselves, or does a centralized authority dictate parameters for the purpose of interoperability and universal acceptance?

So many of the solutions that have flashed across our radars disappeared just as quickly because they weren’t solving actual problems, or weren’t going deep enough. Applying some philosophical principles can help with the focus, which brings us to the next point:

4. The why matters more than the how.

OK, the how matters a lot, too, but when you lose sight of the why, the how gets diverted to a path of convenience and compromise.

When faced with daily deadlines, competing personal interests and a desire to please, it’s so easy to focus on short-term wins. We pat ourselves on the back and get into the habit of seeking out the next one, often losing sight of why we started on our journey in the first place.

Small wins are good. Progress is better, and progress is best measured against big goals. The bigger the goal, though, the larger the obstacles, which introduces the next point:

5. Barriers are constructive.

Just like that old saying that you can tell the quality of a person by the quality of his or her enemies, the same goes for innovative projects. The scope of an ambition is often defined by the obstacles in its way.

Anyone who has ever tried to build something new will tell you how frustrating it can be. There are no exceptions. But those who make it learn to see the barriers as opportunities. We can try to change the barriers, by working with those who created them. Or we can work around them, which often leads to new barriers emerging, but who knows, maybe these are easier to work with. The process always leads to new discoveries, which can strengthen good ideas or transform weak ones.

In the end, it’s the goal that matters, and deep passion tends to feed the stamina needed to keep going. Nothing worthwhile was ever easy.

6. It’s OK to have fun while being totally serious.

Dogecoin, NFTs, rappers and athletes … It’s not hard to understand why many think our industry is immature when they see attention gravitate toward the cute and the glitzy, and a tweet from a billionaire moves the market.

Yet dismissing anything as superficial without scratching the surface to see what’s underneath is an easy reflex that misses an opportunity to glimpse a bigger picture.

The cute and the glitzy are outlets of self-expression that have value for many. A whole generation of investors is finding a new voice with collective influence, and their criteria for allocation draws on different inspiration. And of course a tweet can move a market that runs on narrative – sentiment changes often, however, in either direction. That in itself is both a part of and a result of the crypto market’s compelling story.

Our industry will always have the wacky and the bewildering. They are often a sign of froth, and sometimes there are dubious ethics or even scams at play, but not always. When viewed through a big-picture lens, they can shed light on both the why and the how of the change this technology is inspiring. They may divert attention from the solid construction and rigorous research going on behind the scenes, but that shouldn’t matter – the potential of cryptographic and blockchain technology is vast, and will be better off with a greater variety of ideas stretching it in different directions.

Finally, speaking of variety:

7. The industry will succeed because of the people in it.

That’s you.

If you joined our amazing Consensus event this week, you’ve glimpsed the sheer breadth of talent from all sectors, bringing different perspectives and experiences to the table. Our ranks now span geographies, demographics and specializations.

Entrepreneurs, regulators, artists, analysts, athletes, lawyers, designers, economists, traders, investors, developers and writers are just some of the people who have joined us on stage, on screen and in our reporting over the years.

And even if you don’t fit into any of those classifications, even if you have not yet worked in our industry or on a related project, the fact that you’re reading this means that you, too, are part of the change we’re working on. Whatever your contribution, your presence here is valued and your input is welcome.

In almost all areas of life, diversity brings resilience – whether we’re working together, arguing or competing, we make the landscape stronger. And that should be why we’re here in the first place.

The Bitcoin Mining Council: Misunderstandings, Vigilance and Steps Forward

The intensifying criticism of bitcoin for its environmental footprint reached its mainstream peak last week when Elon Musk tweeted skepticism about bitcoin’s long-term viability under current conditions. MicroStrategy CEO Michael Saylor reached out to him to ask if he had spoken to any miners on the issue, he responded no but he would like to, and so Michael Saylor set up the meeting, convening many of North America’s largest bitcoin miners. 

The result was the creation of the Bitcoin Mining Council, which set off a barrage of criticism. How dare they have a closed-door meeting? Who are they to form a Council? Surely the next step is miner collusion and possibly even network censorship?

As Saylor explained on our Consensus panel this week, the objective was to get Musk to listen to the miners explain their energy mixes and strategy. The result was a determination to improve the objective data around bitcoin mining energy consumption, and to encourage bitcoin miners around the world to move toward renewable energy.

Both steps would be positive for the industry. Actual data rather than anecdote and second-hand reporting would enable us to track the industry’s evolution and could help finally put to bed the allegations that bitcoin mining is mainly based on “dirty” fuel. And more miners taking the conversation seriously could move the needle toward a greater composition of renewable energy sources in the mining mix, which would also assuage the industry critics.

But the bitcoin community is sensitive to any whiff of centralization, as it should be. This harsh scrutiny is also positive for the industry. It keeps it “honest” and makes sure that any attempt to circumvent the network’s decentralization and censorship resistance will be met with such a loud reaction that it will ultimately fail.

Saylor, Musk and the miners are almost certainly not thinking of breaking the protocol’s decentralization – that would weaken bitcoin’s value, in which they are all heavily invested. Also, as Saylor pointed out, if he wanted to have a “secret” meeting, he wouldn’t have told the world about it.

But the community is right to cry foul at the slightest suspicion, as decentralization gets eroded by stealth, often accidentally but usually irreversibly. We saw this with the evolution of the internet.

Personally, I find both the Saylor/Musk initiative and the community’s reaction encouraging and comforting. We have action-minded people working on solutions to serious problems, and we have the community making sure it doesn’t overstep. We’re in good hands on both sides.

Chain Links

This week saw two renowned investors confirm interest in crypto asset investments. In conversation with our Chief Content Officer Michael Casey at Consensus this week, Ray Dalio admitted to holding bitcoin. And in an interview on Bloomberg, Carl Icahn said that he was looking into making a potentially large investment (around $1.5 billion) in the crypto markets. TAKEAWAY: The growing involvement of respected names such as these not only triggers deeper research by other investors who start to worry they might be left behind; it also removes any career risk for fund managers thinking about suggesting crypto asset investments to their clients and/or bosses.

Federal Reserve Governor Lael Brainard kicked off Consensus this week with some prepared remarks that echoed what Federal Reserve Chairman Jerome Powell said last week – that private stablecoins posed a risk to consumers. TAKEAWAY: This is worth keeping an eye on, as negative regulation of stablecoins such as USDC and USDT (tether) could negatively impact asset prices, given they are the source of much of the market’s liquidity. A ban is unlikely (and impractical), and the posturing could just be stage setting for the eventual rollout of central bank digital currencies, but it is a market risk, especially given the spectacular growth of stablecoin supply over the past year alone.

Two leading Wall Street investment banks have initiated coverage of Coinbase (NASDAQ: COIN). JPMorgan gives it an “overweight” rating and a price target of $371 per share (up over 50% from $237.88 at time of writing), while Goldman Sachs classifies it as a “buy” and has a price target of $306 (up almost 30% from price at time of writing). Both cite the favorable outlook for the crypto market, with Goldman Sachs paying particular attention to the potential of decentralized finance. TAKEAWAY: Regular readers will have heard me say this before: One of the main results from the public listing of Coinbase is the need for mainstream analysts to get up to speed fast on the crypto industry. This signals “acceptability.” And favorable coverage like this on Coinbase enhances the visibility of the crypto market as a potential investment area.

Crypto exchange Coinbase has hired a former Goldman Sachs co-head of government affairs Faryar Shirzad as its new chief policy officer. TAKEAWAY: This comes on the heels of Coinbase co-founder and CEO Brian Armstrong’s public tour of the capital’s power brokers earlier this month. Pushing for pro-crypto legislation is positive, but we need to make sure that it does not lead to regulatory capture, which favors the large companies in the industry at the expense of the smaller ones. That would centralize influence, which is precisely what the concept was created to avoid.

One River Digital Asset Management has filed with the SEC for a bitcoin ETF that would be carbon neutral – it would buy and dispose of carbon credits to account for the emissions associated with the bitcoin in the fund. TAKEAWAY: Well, this is one way to embrace the environmental debate around bitcoin mining. The problem is that carbon offsets are still a controversial workaround, and the “green-washing” here feels a bit like marketing. What’s more, former SEC Chairman Jay Clayton – yes, he who steadfastly refused to approve any bitcoin ETF on his watch – is an adviser to the fund management company.

A division of the financial services firm and investment bank Cowen has raised over $46 million for its Cowen Digital Asset Investment fund. TAKEAWAY: The size of the fund may be small, but its provenance is significant – a New York-based investment bank with more than 100 years of history is setting up a digital asset fund.