Crypto Markets Are Where the Fun Is

A model that I often use for cryptocurrency is that it is rediscovering traditional finance: In its early days, crypto was a brand-new financial system, unsullied by the old evils of central banking, leverage, regulation, etc.; eventually people realized that some of those things were good, and started reinventing them. One way to reinvent finance is for idealistic crypto technologists to invent banking, leverage, regulation, etc., from first principles, with cursory or no knowledge of how the traditional financial system addressed these issues or why it rejected other solutions. You would expect this to lead to flawed but interesting results, whole new ways of doing things that might blow up horribly but that might instead point the way to a better future.

Another way to reinvent finance is for, like, Wall Street derivatives structurers or high-frequency traders or securities regulators to say “wait, I know this stuff, lemme go do crypto where it’s easy and no one else knows it.” Here is a very fun story from Bloomberg’s Justina Lee: