After years of unrelenting knee-jerk attacks on crypto, the Australian Financial Review tries to profit from it
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OPINION: The Australian Financial Review has long betrayed a bit of a split personality when it comes to crypto: really good, smart coverage by its reporting team — and really dumb, knee-jerk coverage by its opinion page.
In the past few months, Australia’s ‘premier’ business publication has taken just about every cheap shot imaginable about this emerging industry.
What’s really galling is that having done this, the AFR is attempting to profit from crypto. The Australian Crypto Currency Summit 2022 kicked off yesterday at the Crown Sydney, with a lineup of crypto-friendly panellists and sponsors that include crypto exchanges and businesses in the industry.
— Rashmi Punjabi (@punjabi_rashmi) April 5, 2022
It would be one thing if the AFR had been printing incisive criticism for the past few months. There is a lot of hype and grandiose claims that come from some corners of the crypto industry. Reasoned, informed criticism would be not only welcome, but valuable.
Unfortunately, a lot of the AFR’s columns seems to be written by folks who don’t even understand the difference between Bitcoin and Ethereum, and seem ignorant of the basic advances in the space.
The AFR editorial page has declared Bitcoin dead (in 2018!); likened the “crypto craze” to “tulipmania” and gambling; called for huge taxes on crypto profits; poo-pooed NFT as “stuffing investors’ pockets” even as Aussie artists call them genuinely life-changing; mocked the potential of web3; and even linked crypto to social unrest.
Exhibit A: “The case against crypto as an investment,” published Nov. 30, 2021, by financial adviser Mark Draper, who writes that the “mania surrounding crypto assets makes the dotcom boom of over 20 years ago look totally credible”. He falsely claims that crypto is based on “mutual trust” and also writes that it appears just as vulnerable as other technology to cyber fraud, which certainly isn’t true.
Draper seems entirely ignorant of the permissionless, borderless crypto-lending pools operated by the likes of Aave, Compound and Australia’s Maple Finance, questioning who would conduct “the lending that is the lifeblood of capitalism” if a central bank digital currency led to a drop in bank deposits.
He further misunderstands what crypto being “non-custodial” means, citing the 2019 collapse of Canadian exchange Quadriga as a risk of using a non-custodial service. But of course, Quadria was custodial, which is why people lost their funds. It’s worth mentioning that there are plenty of examples of financial planners stealing money from their clients.
Exhibit B: “Why crypto is gambling and not investing,” January 24, 2022, by University of Melbourne financial professor Kevin Davis, who sees crypto as entirely bereft of social value, enormously wasteful and “bound to end in tears”.
Let’s be clear: Crypto is certainly highly speculative — as are many investments, as venture capitalists well know. A gamble is a bet on a game of chance, which is why some consider gambling morally suspect. But even Bitcoin’s biggest critic wouldn’t say its long-term success or failure is akin to a roll of the dice.
Davis also ignores all the resources used in the legacy financial system and the possibility for huge efficiency gains using smart contract platforms.
He writes that “most punters will need to avoid the complexities of direct crypto ownership (storing and remembering complex codes or passwords) and deal through an intermediary such as a cryptocurrency exchange” – a dubious claim, given how easy it is to store crypto in a Metamask browser plugin or a small hardware wallet.
One of the biggest trends of this bull cycle has been the arrival of institutional capital: Cathie Wood’s ARK Invest, Melbourne-based Apollo Capital, Sam Bankman-Fried’s Alameda Research, Netscape founder Marc Andreesen’s Andreessen Horowitz, and many more.
These firms have invested billions into crypto … but you’d never know it from Davis’ article, which falsely claims that “the crypto craze involves unsophisticated and poorly informed individuals being lured into an activity which is gambling, but marketed as an investment opportunity.”
Exhibit C: “Will higher interest rates crush cryptocurrencies?” December 28, 2021, by AFR columnist Christoper Joye, which claims in the subhead that “zero cash rates may have been a key driver of the appeal of non-income-producing assets like bitcoin.”
There’s one huge flaw with this argument — Bitcoin isn’t a non-income-producing asset. You can earn more Bitcoins on your Bitcoin by depositing them into a protocol like the Celsius Network, which on Wednesday was offering yields of up to 6.55 per cent on Bitcoin deposits. There’s even more opportunities to earn yield in decentralised finance on smart contract platforms like Ethereum, Avalanche and Terra. Apollo Capital told me that last year they made 33.65 per cent APY on stablecoins.
Finder’s Fred Schebesta calls DeFi crypto’s killer app – “like the email of crypto, where you can earn a yield, because yield is in demand right now,” he said last June.
Back in 2019, it might have been excusable to think that crypto wasn’t an income-producing asset or was only useful for speculation. But anyone who has been paying attention over the last year – anyone who has even read the AFR’s own coverage – should know that there are boundless opportunities to earn yield in decentralised finance.
Exhibit D: “When the Web3 bubble pops, real-world assets will survive,” January 11, 2022, a syndicated piece by Financial Times columnist Rana Foroohar. It’s a hard piece to rebut or even summarise, because there’s so little to it. Let’s just say that Foroohar is sceptical of web3, without really understanding it.
BTC Markets chief executive Caroline Bowler — one of the speakers at the AFR “crypto summit” — took to Linkedin to say she had taken two days to read this article, as she found it so challenging to read.
“I don’t know the background of the author. Whoever they are, they wrote a thin piece masquerading as insight. Our industry is receiving the most mainstream attention it’s ever had. Yet a significant proportion of the commentary perpetuates misconceptions, is confused about bitcoin (vs. alt coins), and keeps signalling the death of crypto.
“There are local journalists who know the technology & industry. How long is it going to take before the rest of their colleagues and editors catch up?”
Bowler added in a comment that she had “no issue with alternative views. Researched, up to date, considered views are essential. It’s how we all improve. That’s not this article nor the many others.”