Cryptos Are An 'Intellectual Experiment' That 'May Not Work', Xapo Founder Says

  • "It would be irresponsible" to not acknowledge that cryptos are still an experiment that could fail, Xapo founder, Wences Casares said.
  • He added that the chances of cryptocurrencies being successful are now greater than them failing.

Wences Casares, a board member at PayPal and the CEO of Xapo, a Hong Kong-based firm that focuses on cold storage solutions for cryptoassets, recently stated that cryptocurrencies are an “intellectual experiment" that could end up failing, but either way will allow us to learn.

"Irresponsible" To Not Admit Cryptos May Fail

Casares explained that the idea of having decentralized, digital currencies is an experiment because they “may or may not work.” He added that if cryptos ultimately fail, they could still be considered a good “learning experience.”

When questioned about how someone like him - who has “built a business on bitcoin” - thinks cryptoassets are still an experiment, Casares said:

I think it would be irresponsible to not acknowledge that it could not work. The chances of this experiment not working are non-trivial. And, it’s important for people who know that, like myself, to always acknowledge that and let people know that.

Wences Casares

However, Casares also suggested that substantial progress has been made and that the chances of cryptocurrencies evolving and achieving mainstream adoption are greater than them failing.

Cryptos Are Currently "Like 1992 Internet"

There may already be crypto-related firms such as Coinbase that are seeking multi-billion dollar valuations, but Casares cautioned that “technology is made by humans” who are “fallible.” This means that “we could find some [big problem] that we haven’t found in ten years [which might] render the system worthless,” the Argentinian entrepreneur and philanthropist noted.

Responding to what he thinks has “a good chance of succeeding”, Casares said: “We are in the equivalent of 1992 for the internet. In 1992, we didn’t call it the internet, we just called it TCP/IP” - which is now the standard communications protocol for the web.

He continued to explain that “all you needed to know back then was there was this new protocol that moved information from anywhere to anywhere. Two, it [did this] in real-time. And three [it was done] for free.”

Although streaming HD videos and high-quality downloadable images were not available during the early days of the internet, they have now become quite common because the “internet experiment” was successful.

"Three Things" Cryptos May Give Us

According to Casares, there are “three things” that crypto currently does - with the first one being that blockchains have allowed us to build computer systems that are “sovereign”, or in other words, “autonomous.”

Casares continued: 

Blockchains ‘answer to noone’. They have their own rules … [and] it’s important because it has never been accomplished before … other important attributes [are that blockchains are] uncensorable … nobody can keep you from sending a transaction or receiving a transaction, or holding value in it.

Wences Casares

The third thing crypto has given us is the concept of having deflationary currency, as there can only be a maximum of 21 million bitcoins in existance, Casares pointed out.

Bitcoin To Change Money "Like Internet Changed Information"

Assuming cryptos succeed, then bitcoin (BTC) would become “a global non-political standard of value” and a “global non-political standard of settlement” - according to Casares. Interestingly, the Xapo founder, who has previously predicted a $1 million bitcoin price, said he dosn't see cryptos replacing fiat currencies.

He explained that:

bitcoin could change money the way the internet changed information but this idea that a blockchain can be used to change an asset that already derives its value from a central authority like title insurance, or banks, or securities settlement is really non-sensical. It’s not true and it doesn’t make any sense.

Wences Casares

Chinese Yuan 'Inversely Correlated' with Bitcoin, Amidst US-China Trade Wars

Since January 2018, China and the US have been involved in an intense trade war in which both countries have significantly increased tariffs on imported goods and services.

Due partly to the rising tension between the two countries, the Chinese yuan (CNY) has been losing value against the USD. During the same time period, the price of bitcoin (BTC) and other major cryptoassets has been surging.

As noted by the South China Morning Post (SCMP), the value of BTC, the world’s most dominant cryptocurrency, increased by 26.5% to $7,878 during the time period from May 5 to May 17. Notably, US President Donald Trump had announced on May 5 that he would further increase tariffs on goods imported from mainland China.

Chinese Yuan Weakens as Nation’s Government Responds to Increased Tariffs

The SCMP pointed out that the yuan dropped to its lowest level since the past six months after the Chinese government responded to Trump administration’s decision to impose higher tariffs on China.

Commenting on the price fluctuations of both the yuan and bitcoin, Garrick Hileman, a Macroeconomics Researcher at London School of Economics (LSE) and Head of Research at Blockchain.com, remarked:

We are observing a strong inverse correlation between the [Renminbi] RMB’s value and bitcoin, meaning that recent RMB declines over trade tensions have been closely matched by increases in the value of bitcoin.

“Correlation Does Not Necessarily Equal Causation”

Hileman also mentioned that we “cannot be 100% certain” that the bitcoin price has been increasing due to heightened concerns regarding trade tensions and the corresponding decline in the value of the yuan. The blockchain researcher stated:

Trade tensions and declines in the RMB’s exchange rate as correlation does not necessarily equal causation.

Hileman, who earned his Phd from LSE, revealed:

This is not the first time we’ve seen significant increases in the value of bitcoin taking place alongside yuan concerns.

He added that there’s “growing recognition of bitcoin as ‘digital gold’ and it being used as a hedge against various macroeconomic risks.”

“This Year, the Narrative Is Bitcoin, Bitcoin, Bitcoin”

According to the SCMP, bitcoin’s price may have surged recently due to the generally positive remarks made about it at the Consensus 2019 conference.

Meltem Demirors, the Chief Strategy Officer at CoinShares, a crypto treasury management firm, has also confirmed recently that the narrative this year has been mostly about Bitcoin. Demirors revealed that both institutions and retail investors are “feeling good” and are “more confident” about the long-term potential of Bitcoin and the evolving ecosystem that supports it.