The winning trade of the post-pandemic era would seem to be long the past, short the future. https://bloomberg.com/opinion/articles/2022-02-06/niall-ferguson-crypto-s-cold-winter-will-give-way-to-a-red-hot-future 1/7

First came the hedge funds. Then came the banks. Now the sovereign wealth funds, the pension funds and the big endowments are sniffing around. Sooner or later, a respectable central bank will admit that it has some Bitcoin in its reserves, and the financial journalists will pay less attention to El Salvador’s eccentric experiment to make Bitcoin legal tender, alongside the U.S. dollar.

It’s that scarcity that investors like, compared with — as the pandemic made clear — the potentially unlimited supply of fiat currencies.

Just as the skeptics missed the beginnings of Big Tech in the wake of the dot-com bust, so today’s crypto haters are missing the beginnings of a major disruption of the financial system in the form of DeFi. The example Rincon-Cruz cites is Uniswap, the largest on-chain decentralized exchange protocol.

Notice that bills of exchange were not money in the textbook sense. Yet they constituted a form of peer-to-peer credit that proved crucial to the development of European commerce from the late-medieval period down to the 19th century. Notice, too, that there was no need for third-party institutions to verify or process transactions.

Applying financial history to the future, I expect this crypto winter soon to pass. It will be followed by a spring in which Bitcoin continues its steady advance toward being not just a volatile option on digital gold, but dependable digital gold itself; and DeFi defies the skeptics to unleash a financial revolution as transformative as the e-commerce revolution of Web 2.0.