DeFi curbs systemic risk amid bitcoin volatility, Anthony Scaramucci tells Hedgeweek
By Hugh Leask | 11/06/2021 - 7:25am
Decentralisation of cryptocurrencies is helping curb systemic risk amid the ongoing digital asset price volatility, Anthony Scaramucci, founder and managing partner of SkyBridge Capital, told Hedgeweek on Thursday.
In a wide-ranging conversation to close out Hedgeweek’s first DigitalAssetsLIVE event, Scaramucci – who also launched the SkyBridge Alternatives, or SALT, capital introduction conference and was briefly White House Director of Communications during the Trump administration –discussed his firm’s initial entry into the cryptocurrency space, as well as the challenges and the tipping points within digital assets.
“When I left the White House, the first thing I did was buy the URL skybridgebitcoin.com,” he said. “It became clear from my discussions with the treasury that they were going to digitise the dollar, and the gateway for that digitisation, I felt, was going to be bitcoin.”
SkyBridge today has around USD700 million of bitcoin across its platform, but its initial launch was not altogether plain sailing. “Because we are an institutional investor, it was a slow roll for us; we had to get comfortable with the notion that bitcoin was going to scale to over 100 million users. But when that became clear, we launched our fund.”
Despite the soaring interest in digital currencies in recent years from across the investment spectrum, and the arrival of marquee-name evangelists in the form of well-established hedge fund managers such as Stanley Druckenmiller, Ray Dalio and Paul Tudor Jones, the reality is that institutional adoption is “not quite there yet”, Scaramucci said.
He believes that more time, more seasoning and greater regulatory clarity is still needed to tempt large-scale institutions into bitcoin ecosystem - but added the main drivers of this asset class are the scalability of the network, the scarcity of bitcoin, and its durable legacy.
Likening bitcoin to Amazon, which before conquering the online retail spaced faced competition from countless online stores and retail players, along with several sharp drops in value, he said: “Bitcoin is the apex predator of crypto space. It’s been attacked virtually every second of its existence, there have been attempted hacks, other cryptocurrencies are competing against it. Yet here we are with something like half of the market capitalisation of all of crypto.”
He considered the potential impact of central bank digital currencies, and touched on the debate over the valuation basis of bitcoin, suggesting that while there has been short-term speculation, there also fundamentals to its value. He also reflected on how crypto assets have withstood the recent price turbulence, which has seen some USD1 trillion taken out of the market.
“I want you to imagine the banks having a trillion dollars taken out of their mortgage-backed positions, or a collapse in one of the banks to the tune of USD1 trillion, and the amount of rescue they would have needed from the Federal Reserve,” he said.
“Yet because of decentralised finance, we had a trillion dollars evaporate from the market and we’ve had no banking seizure and no collapse of our institutions. Decentralisation has offloaded a lot of the systemic risk that people have been worried about.”
Like this article? Sign up to our free newsletter