The head of Binance called cryptocurrencies the only stable phenomenon amid financial problems. Why?
The global economy is going through a bad period in its history – the situation is complicated by rising inflation in the US and around the world, as well as the energy crisis in Europe and geopolitical problems on the continent. In such an environment, it would seem that cryptocurrencies cannot be a “stable investment” because they are traditionally classified as risky assets. However, this is not the case – during the Web Summit event in Lisbon, Binance CEO Changpen Zhao explained exactly what the main advantage in investing in digital assets is. We give more details about the expert’s point of view.
It should be noted that the situation in the global economy may eventually begin to stabilize. This conclusion was made after yesterday’s 75 basis points increase of the key rate from the US Federal Reserve, which happened for the fourth time in a row. Prior to that, such aggressive hikes were only seen in the nineties, which means that the scale of the current change is indeed serious.
However, now experts, along with representatives of the Fed, assume that the rate hike will not be as drastic in the future. This will mean less pressure on the economy, a relative stabilisation of the situation and an increase in investor appetite for risky assets, including cryptocurrencies.
US Federal Reserve Chairman Jerome Powell
Why buy cryptocurrencies?
Zhao’s arguments may well conflict with the reality of the Bitcoin chart, as the major cryptocurrency has fallen more than 70 per cent in the past year.
However, the Binance chief urges not to look at the prices of BTC and other popular digital assets. According to him, investors should focus on the fundamentals of the crypto industry. Here’s a relevant rejoinder from the entrepreneur, in which he shares his perspective on what’s going on.
Take a look at the technology and fundamentals of cryptocurrencies. They still have a limited supply, nothing has changed in that respect. It is in terms of technology that crypto has been the most stable thing in this turbulent situation.
Note that even in the current market environment, some cryptocurrencies are moving from active issuance to deflation. The most prominent example of this is Etherium, whose network switched to PoS in mid-September. As a result, the blockchain's power consumption dropped by more than 99 per cent, and ETH issuance has severely declined.
In particular, in the 49 days since the network switched to PoS, it has generated 2,579 new ethers. And if the blockchain had continued to run on PoW unchanged, it would have already generated 583,000 new ETH. And that's a clear demonstration of the pros of a cryptocurrency industry whose developers keep working on projects.
Changes in the supply of ETH on the Etherium network after the merger
Zhao also touched on the current state of cryptocurrency regulation as Binance attempts to obtain licences in countries like France, Spain, Bahrain and Abu Dhabi. Despite the controversy, Chanpen considers US regulators to be “good” in terms of support from banks.
Using an automated clearing house protocol, he says, crypto exchanges in the US “can debit a user’s bank account automatically every month without user intervention.” In other parts of the world, a similar level of service is not yet available.
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As a reminder, Chanpen made a lot of media headlines this week because of his collaboration with Ilon Musk on the Twitter buyout. Musk last week completed a $44 billion deal to acquire the social media platform. 500 million of that amount was invested by Binance – the exchange expects to be actively involved in the company’s life in the future.
The likely connection between Twitter and cryptocurrencies
Note that the detailed reasons for Binance's interest in participating in buying Twitter have been listed in a separate piece. In short, the cryptocurrency exchange wants to use the platform to massively promote digital assets among its users. Educational initiatives will presumably be used for this purpose.
For example, there is now a trend in the coin industry called "learn and earn", that is, "learn and earn". It involves the possibility of earning a small amount in crypto after reading a certain theoretical material or series of them, and answering the questions posed correctly. It's possible that we'll see something similar in the future on Twitter.
Chanpen has previously explained the reason for investing in the deal, but at Web Summit he added a couple more comments on the subject. Here’s his quote.
We want to support free speech. Binance’s goal is to expand the freedom of financial flows. And before that, we need to focus specifically on freedom of speech.
Changpen Zhao, head of cryptocurrency exchange Binance
In general, the head of Binance admits that “predicting Ilon Musk’s behaviour is quite difficult”. For example, Changpen himself was unaware of Ilon’s announcement that a monthly fee of $8 would now be charged for verification on Twitter. Zhao is also expecting many new features in the social platform. Here’s his rejoinder.
I expect that with Ilon at the helm, the speed of new features on Twitter will be much faster.
Elon Musk and Kimball Musk
We believe that cryptocurrencies can indeed be considered a relatively stable phenomenon in the current crisis. And while they are sometimes more volatile than equities, the events of this year, along with inflation and the depreciation of many fiat currencies, have proven otherwise. And since some blockchain projects become deflationary over time as well, this creates additional motivation for investors to connect with them.
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