Cryptocurrency heyday over?

Of the nearly 1,000 exchange-trade funds (ETFs) trading in Canada, the ones from the cryptocurrency sector are sold short the most, led by the Ether ETF (ETHR) with 84.4% of its float sold short and the Bitcoin ETF (EBIT-T) with 45.9% of its float sold short. Of the top 20 ETFs sold short, a quarter of them are related to cryptocurrencies, as noted in my May 30 piece Short sales on the TSX in the Globe and Mail.

China banned cryptocurrencies last year. Western governments are curiously complacent. Yet, digital currencies make it easier to avoid taxes and to profit from illegal activities. They also undermine central banks’ control of the money supply, making it harder for them to control inflation and keep the economy out of recession. Moreover, mining for digital coins is a huge drain on energy grids, which contributes to climate change. Lastly, cryptocurrency repositories are regularly hacked and hundreds of millions of dollars worth are stolen by criminals and renegade states like North Korea to finance their priorities, such as missile development programs.

Investing legends Warren Buffett and Charlie Munger have long been detractors because cryptocurrencies are not an asset that produces anything worthwhile. You can invest in apartment buildings and receive rental income, or in farmland and produce food, or in dividend stocks and receive dividend income. But with cryptocurrencies, nothing is produced; you are just counting on someone else buying it at a higher price.

Why have regulators and legislators in the West allowed cryptocurrencies to go this far? An article today in the Financial Times of London, Tech experts urge Washington to resist crypto industry’s influence, gives a few hints: a huge lobby campaign has been mounted by the industry. But now it seems to have reached a point where the crypto lobbyists themselves are now being lobbied against. Here is the letter the tech experts recently sent to U.S. politicians.