Liu Jianwei liujianwei755@163.com Christmas Day of 2021 saw the Los Angeles Lakers play their first home game at Crypto.com Arena. The sentimental attachment of many basketball fans towards Staples Center may not be warranted. After all, it is the same venue, except for the sponsorship switching from an office-supply chain to a cryptocurrency platform and exchange. This renaming rights agreement is believed to be the most expensive in sports history, with a hefty price tag of US$700 million over the next 20 years. On the other side of the Atlantic Ocean, the world’s largest cryptocurrency exchange, Binance, whose roots are in China, is financing a 100 million euro (US$113m) initiative with industry group France FinTech in an effort to support the cryptocurrency and blockchain sector in France. Millions of dollars or other currencies are pouring into the cryptocurrency industry. Of the many cryptocurrencies, Bitcoin, which was made available to the public in 2009, remains the most widely-traded and covered one. As of November 2021, there were over 18.8 million Bitcoins in circulation with a total market cap of around US$1.2 trillion. A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks based on blockchain technology, a distributed ledger enforced by a disparate network of computers. Fiat currencies are backed by physical goods, gold or other valuable metals for instance, or by national governments through their central banks. The fluctuation in value of these currencies is generally reflective of supply and demand, the ups and downs of national economies and other macroeconomic factors. A defining feature of the cryptocurrencies is that they are generally not issued by any central authority. Hence some argue that the value of any cryptocurrency lies merely in the very belief that it is worth something, because at the end of the day no one and nothing is there to back its value, if any. The limited supply of any cryptocurrency does not guarantee that it can serve as a hedge against inflation. One particular cryptocurrency may be limited in its circulation or mining, but myriads of cryptocurrencies can be created out of thin air, ranging from Ahacoin all the way to Zerocoin. We cannot say that cryptocurrencies serve no real purposes in the physical world. For example, as a more convenient and evasive method of financial transaction, they are duly embraced by parties engaged in shady activities not sanctioned by authorities. Their technological fa?ade, of course, also adds to the allure. The utmost attraction of the cryptocurrency lies in its existence as an investment vehicle. Of the hundreds of thousands engaged in its mining and trading activities, perhaps very few are actually seriously pondering over its underlying value. As long as vast amounts of fortune can be generated from this particular asset class, if it can be classified as one, the party goes on. Indeed, there is no lack of entertainment appeals in the fashionable world of cryptocurrency. Currently the world’s richest man, Elon Musk, is a major advocate of cryptocurrencies, and he has previously indicated that he personally invested money in Bitcoin, Dogecoin and Ethereum. On the other side, billionaire investor Charlie Munger is not a fan of cryptocurrencies at all. “I wish they’d never been invented,” Munger said at the Sohn conference in Sydney on Dec. 3, 2021, according to The Australian Financial Review, “I think I should say modestly that the whole damn development is disgusting and contrary to the interests of civilization.” He added, “I admire the Chinese, I think they made the correct decision, which was to simply ban them.” The western governments are comfortably looking the other way. Their politicians have no incentive to potentially upset a large number of voters already involved in various aspects of cryptocurrency businesses. What if there are dire consequences? Well, we will cross the bridge when we get there. (The author is an independent financial investor.) | 