Interview with Anderson Mccutcheon, crypto expert and Founder/CEO at Chains
With the CPI out recently, giving a grim outlook on America’s financial landscape and a recession in the forecast, experts wonder how cryptocurrencies will fare in the coming year. Anderson Mccutcheon, crypto expert, and Founder/CEO at Chains remains at the forefront of digital currency and speak about trends we are likely to see as inflation hits the crypto market.
Founded in 2020, Chains is an all-in-one platform backed and designed by cryptocurrency and financial industry experts. The company is developing a stack of products focused on improving cryptocurrency and NFT accessibility for a new generation of users.
The following are interview questions and answers with Anderson Mccutcheon, the Founder and CEO of Chains.
What effect will inflation have on the crypto market?
There are two primary forces that affect the relationship between cryptocurrency and inflation. One of the key effects of inflation is the reduction of multipliers on equities, so equities begin to get traded at lower multipliers. Basically, inflation, coupled with increased interest rates, means that debt becomes more expensive. There's less capital to deploy for growth, which leads to slower growth objectives, causing the multipliers on equities to go down.
When multipliers on equities go down high growth companies, riskier companies such as tech companies, get their valuations slashed. These valuations are usually the result of very high multipliers that account for significant growth. Usually driven by cheap capital.
When someone wants to make bets and generate higher returns, they feel this is the time to take on more risk. They deploy more capital into things like these equities. Deploying capital into cryptocurrency specifically is not very different from that and has become known as somewhat of a risk on assets.
Basically, deploying funds into cryptocurrency is another way of capital distribution. They deploy capital into cryptocurrency as part of their response strategy. The more capital that goes out, the more capital is deployed. Once inflation goes up, there is less capital to invest and less capital to be deployed into high growth assets, which crypto is being lumped into at the moment.
So in principle, high inflation that causes high interest rates should negatively affect cryptocurrency. However, the other force within the space is the fact that cryptocurrency has a certain baseline utility to it. In the case of infinite inflation, a ton of finance will still be worth money, and the value of that money increases as long as inflation goes up.
Cryptocurrency, on a long enough timeline, should go up because Bitcoin and Ethereum have very particular qualities that provide them with fundamental value, which is nonzero. Once the speculative, multiplier risk diminishes, the value of cryptocurrency will start going up as the value of the currency you're trading against diminishes. Crypto will likely keep retaining or possibly increase its utility.
Will market volatility continue to escalate or are we getting near the bottom of this downward trend?
I think it's far more reasonable to assume that the S&P 500 and Nasdaq are just supposed to, on a fundamental level, go down further. It would be very weird if they didn’t, considering previous instances of inflation, depression or recession. The S&P 500, NASDAQ, and similar indexes will likely continue going down. It's fairly likely that crypto will go down as well, but not as much. I don't think it's very unreasonable to assume that we’ve hit the bottom of equities right now. It is however possible that we're very close to the bottom in crypto.
How cryptocurrency might benefit from rate hikes?
I think it's a very unlikely scenario that cryptocurrency would benefit from rate hikes because rate hikes essentially increase the price of debt. This means less leverage and less growth as demand for deployed capital. So it's very good for cooling off the economy, but I don't think that this is something conducive to the crypto market in any way from what I can see.
Central Bank issued digital currency versus corporate and DAO-driven cryptocurrencies
I think the central bank issuing digital currencies is the endgame and could be a problem due to the level of utility that central banks get from deploying digital currencies. I think that we are very likely going to see countries decline in digital currencies in quick succession in the coming years. I think that corporate-issued digital currencies are dangerous. Specifically, utility tokens are to be used within the system. I think that if a currency was issued by Facebook or Amazon for instance it would be absolutely disastrous.
So if countries like Russia or large companies such as Facebook, which has two billion people, were to deploy their own cryptocurrency, they would rival even the biggest economies.
Blockchain and traditional MMO gaming economics
These are metaverses and if you introduce real world economics into an MMO, you're basically going to attract the sort of people that are looking to earn money, and not necessarily play games. We know over a long rough timeline, nobody's going to enjoy playing the game for money, because if they were to do that, they might as well just play Microsoft Excel.
“Oh my god, I'm a champion in Microsoft Excel. Let me compete with my friends..” So it's like, if you're really playing an MMO to win money, why not play Worlds or play C++ or whatever, like what we're doing is not very different for a person who's playing a game on his computer to earn money.
I think that the gaming industry in general is going to flourish. Just like almost any product that provides an escape or preys on people's isolation and addiction. These types of things work well in recessions. Things like alcohol, gambling, McDonald's, Facebook, drugs, and things that rely on long long term dependency flourish because it gives people instant gratifications whether they lose their job, have less opportunities to experience the world and be social, or don't have as much money to enjoy life. This is one of the reasons why some of the poorest countries in the world experience high rates in alcoholism and drug dependency. You use whatever you have in front of you to get your brain to be in a happier place.
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