- Crypto's journey has only just begun, says exchange platform Gemini – founded by the Winklevoss twins.
- Here Gemini explains the future of Bitcoin, and the best use of the so-called 'stable coins'.
- Crypto regulation shouldn't be feared, Gemini UK head Blair Halliday tells Insider.
- Visit Business Insider's homepage for more stories.
Love it or hate it, Bitcoin is having a moment.
In the last 12 months alone, it's gone from a ridiculed speculation trade, to smashing the $41,000 level in January – with some investors even floating it as the new Gold.
Bitcoin's story hasn't been without its naysayers. In 2017, Jamie Dimon, chief executive office of JP Morgan, called the cryptocurrency a "bit of a fraud," adding that it was "worse than tulip bulbs." Since then, a lot has changed with JP Morgan now leading Wall Street arguing there is a case for Bitcoin hitting $146,000.
Yet, after a hard run this year, investors are growing weary, with a growing number believing it is forming a bubble that will burst. This week, Deutsche Bank published research that showed market players rated Bitcoin an 8.7 out of 10 on a bubble scale, with 10 being an 'extreme bubble'.
However, for Gemini, a crypto exchange platform founded by Tyler and Cameron Winklevoss, this is only the start.
"From our perspective, we see value in the hold, in utilizing crypto as part of your portfolio. If you're going to have a portfolio for investing, not having a diversification into crypto is missing a trick and missing it big time," said Blair Halliday, managing director of Gemini in the UK.
The Winklevoss twins have famously said they see a case for Bitcoin hitting $500,000, on the grounds that it is set to become the classic inflation hedge, taking the mantle from gold.
With its fixed supply, portability and flexibility, "Bitcoin is better at being gold than gold — and not just incrementally, but by an order of magnitude or 10X better," the Winklevoss twins wrote in a 2020 blog post.
Above-ground gold is valued – conservatively – at around $9 trillion, meaning if the twins are right about "using a gold framework to value Bitcoin, and Bitcoin continues on this path, then the bull case scenario for Bitcoin is that it is undervalued by a multiple of 45," they said.
This journey won't be without its volatility, Halliday said, an often taboo word in the world of crypto. "I recognize that people get concerned about these things, but long term vision… ride it out when there's a drop, recognize it will happen like any asset class," he added.
For Gemini, Bitcoin no longer carries the "Wild West" trope it did in 2018 and 2019, after record-high prices collapsed and a string of scandals involving various exchanges and high-profile cases of fraud and manipulation tarnished the image of digital tokens. Halliday said he would opt for a "HODL" strategy, using the crypto slang meaning to hold onto Bitcoin rather than sell.
"Of course, we understand that with the trajectory up, there's naturally people that are bailing and that will have a bit of a fluctuation, but our view is definitely the value in crypto lies in the "hold" and from a long-term perspective," he added, saying the both the data and the traction supports Gemini's view.
Bitcoin is likely to start appearing in many portfolios as people become more confident in this type of asset, Halliday said based on the interest he has seen from institutional investors.
"Look, JPMorgan changed their tune, why would institutions not do the same?" he asked.
What are stable coins and how should you use them?
Crypto is broader than just Bitcoin, with the likes of Ethereum – which soared past $1,430 to set a new all-time high earlier on Wednesday, outperforming Bitcoin's year-to-date gain of 26%. Even fringe cryptos like Dogecoin performed well last year, after Elon Musk tweeted about the meme-inspired coin.
But, one of the most interesting phenomena has been the growth in stable coins, a group cryptocurrencies that are pegged to a reserve asset, like the US dollar or gold. For example, Tether is a fiat-collateralized coin, backed by the US dollar.
Stable coins have gained traction, offering holders exposure to crypto and attempting to gain more price stability.
Gemini certainly isn't agnostic on stable coins, Halliday noted, pointing to the Gemini dollar - a stable coin that is available on the platform in the US.
But, the real benefit of a stable coin is as a transition point, Halliday said, adding that for the most part they themselves will not appreciate in value.
"I wouldn't necessarily say holding a stable coin for the long term is what I would do personally. I think what it does is enables you to hold a digital currency for quick access, either in, or out, for particular crypto coins that you may wish to purchase," he explained.
Stable coins more naturally fit the role as a means of exchange or payment in some format, he noted, its value is as a good "on- and off-ramp from a crypto-currency that you're wishing to either buy or sell."
Regulation shouldn't feared
One of the biggest threats to the crypto story has been regulation, which some argue would undermine the freedom of these digital coins, one of the central reasons for owning them, according to their supporters.
Most recently, the US Financial Crimes Enforcement Network (FinCEN) proposed a new law that would require companies to collect the names and addresses of people if they make cryptocurrency transactions over $3,000, helping law enforcement in tracking down any illicit transactions being conducted.
In an open letter, Jack Dorsey, CEO of Twitter and crypto-platform Square, called the proposal 'nonsensical'.
"The incongruity between the treatment of cash and cryptocurrency under FinCEN's proposal will inhibit adoption of cryptocurrency and invade the privacy of individuals," Dorsey wrote.
Gemini also wrote an open letter expressing a concern over the substance of FinCEN's proposed rule regarding un-hosted wallets and the process by which it is being rolled out.
"Our position is definitely that we consider that the review period for the FinCen legislation was far too short, and veered on the side of rushed… it was disproportionately short," Halliday said.
But, regulation is inevitable and not to be feared.
"I don't necessarily think regulatory oversight is a problem. I think that everyone can take comfort and control from regulators being involved with this," Halliday said.
As one of the few authorized e-money institutions authorized by the UK's Financial Conduct Authority (FCA), and after having sought regulatory approval in every jurisdiction Gemini operates in, the company is comfortable working regulators, Halliday said.
"I think seeing them as the evil is just going to present issues further down the line," he added.
However, there is an important distinction to make: there should be regulation, not prohibition.
In October 2020, the FCA prohibited the sale and trading of crypto derivatives for retail consumers, arguing that they posed ill-harm and weren't always properly valued by the consumer.
But, this flies in the face of the approach taken by other jurisdictions, Halliday said, pointing to proposed changes to existing European Union regulations.
The EU's approach will provide oversight, making sure companies offering services have the right regulatory controls, which is more appropriate than to prohibit, Halliday said.
"It is important that consumers are protected, but consumers just need to be aware of what they're getting into, but also allowed to make the investment choices that are right for them," he explained, adding that new laws should not stifle development in the space.
Gemini are excited about the UK market, but the financial securities regulator will need to create a viable market for the crypto space, he noted.
"We definitely don't want situations where we're kind of behind the eight ball as it were, compared to some of our jurisdictional competitors," he said.
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