Following Bullish‘s acquisition of CoinDesk, Benzinga sat down with CoinDesk Indices managing director Andrew Baehr to reflect on this year and set the expectations for 2024.
BZ: You have worked in traditional finance. Your generation is now among the last ones that have worked in “the old world” before digitalization. Can you share a bit of this perspective?
Baehr: Entering the finance business in the mid-’90s already felt like stepping into a new world due to a technology overhaul. The use of paper tickets on the New York Stock Exchange floor marked the era, and Ph. D.s began participating in derivative markets to understand and model prices better.
The subsequent crises, such as the ’97 Emerging Market crisis and the ’98 Russian Ruble crisis, tested assumptions in an institutional risk environment. The NASDAQ bubble in ’99 saw a shift toward active and emotional retail trading, leading to cognitive biases and a burst bubble.
A slow rebuild of trust followed these events, influenced by factors like declining interest rates and a continuous search for new yield sources. The financial crisis exposed risks in trying to replace yield with complex financial products, with housing becoming a focal point.
Post-crisis, interest rates remained low, prompting a new boom in lending, real estate, and credit, supported by central bank interventions. The COVID crisis accelerated momentum, driving retail interest in cryptocurrencies due to concerns about currency stability and alternative yield sources.
The cryptocurrency business has largely remained a retail conversation, driven by curiosity, distrust of the traditional financial system, and a fascination with technology. While some achieved wealth, for most, it became an interesting hobby rather than a retirement plan.
People prefer trusted systems, whether buying a car, getting healthcare, or engaging in financial services. Despite not always being in their best interest, traditional financial avenues like 401(k)s, brokerage accounts, and financial advisors get a pass due to their familiarity and regulation.
Comparing it to health decisions, individuals might take vitamins but wouldn’t attempt surgery themselves. Similarly, while individuals may buy Bitcoin as a meaningful hobby, staking their retirement on it requires a more…
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