It’s our money, not yours: the rise of Bitcoin
With Bitcoin grabbing headlines almost daily right now, with value surges followed by sharp corrections to the tune of hundreds of billions of dollars, fears that it could be a bubble set to burst are high. In January, 50% of respondents to a Deutsche Bank survey rated bitcoin a 10 on a 1-10 bubble scale.
However, there remains much excitement around the cryptocurrency, with a major virtual Bitcoin Corporate Strategy Summit this month, with thousands of people claimed to be signed up to attend. And even Tesla CEO Elon Musk has invested US$1.5bn into the cryptocurrency and is planning to accept it as a method of payment in the future.
Manlio Minale, our London Head of Strategy, examines what is the future for our money.
Something is going on in the world of money. Something really big.
Yes, we already know there has been an explosion of fintechs, funded by excess venture capital looking for a home and a better return. Trying to help more people take control of their money and liberate it in new and exciting ways. But I’m not talking about that. It’s bigger than that.
Over the last year, many of us have seen the exponential rise in the price of Bitcoin. Now this has happened before boosted by the FOMO crowd piling in to avoid missing out on making a quick buck. But now the world’s biggest institutions, hedge funds and even the most prudent family offices are developing their own Bitcoin strategies and starting to invest, helping to build a more successful platform for it to succeed.
This for me, is one of the signals that we are starting to move into the next era of money, from dumb physical money to smart digital money, that’s going to shake up the industry and our lives forever.
I’ll now explain why. Fundamentally there are two things going on.
Firstly - a rather technical point - due to flattening interest rates and decreased volatility in the bond, FX and equity markets (with the exception of tech stocks), the world’s investment bankers are starting to look elsewhere for returns and investing their time, resources and intellectual capital into thinking about how to exploit larger volatility in the cryptocurrency markets.
The second is even more important: people and businesses are losing trust in institutions, governments and banks, the latter often resulting in friction-driven transactions, misdirected financial advice and heavy fees. This, coupled with the fact that central banks are printing huge amounts of money to stave off the effects of the Covid-19 crisis, means that our hard-earned pounds, dollars or euros are worth even less than they were before.
But there is a way out of this. Blockchain technology and moving to new, smart universal digital money platforms, which are owned and controlled by us (and not the banks), can solve this.
Let me give you a quick example. Imagine you store your wealth as Bitcoin and travel between the UK and Germany. Now you can instantly switch this to the local currencies to pay for your goods without having to go to an FX counter at the airport and get ripped off.
My prediction is that in the next five years the central banks will start to move away from physical currencies to smart programmable money, where they can use big data sets to adjust interest rates by customer segments rather than a one-size-fits-all money. So, for example, if you are a student you might get different benefits than a high-income earner. This will allow governments to address any fiscal problems in a much more targeted and effective way.
We will then gradually move to one universal, global digital currency owned by the people (be that Bitcoin or something else) that will give us far more control over not just how we pay for things, but ultimately become a platform to manage and maximise our lives.
And if you’re not convinced just look at what ANT Financial, Alipay and Tenpay are all doing in China and you’ll get the gist: where everything financial is conducted over your mobile phone on one simple platform and interface, with physical money gone forever.
But what does this mean for financial brands?
1. Look at trust differently
Trust in the financial space is no longer about size and assets under management but it’s about control and scalability. Building communities of people and businesses who love using your services and who will recommend them to others.
2. Become a platform to do more
Fintechs can no longer just focus on one aspect of the financial lifecycle - i.e. just provide a bank account or digital wallet. They need to start thinking about how they broaden out their platform to help people with more of their daily and financial tasks.
3. Make it feel like a rewarding experience
Often banks and fintechs focus on the functional aspects like price, products, etc. But now they will need to compete for people’s attention and time, and will need to engage them in more rewarding ways.
4. Being more conscious
Finally as the world has found out from the Covid crisis, it’s critical that brands play a more responsible and responsive role in helping people carry out their activities in a way that also improves society. Meaning people will not just choose this is a ‘nice to have’ but see it as critical in the future.
So in short, there are big changes afoot in money - but this gives the most progressive, conscious brands in this space a chance to lead their categories and enable a better future for all of us.