Oliver Wyman's Elliott: Are Cryptoassets Tulips or Dot-coms?

28 January 2022

Our new paper suggests the answer may lie somewhere in the middle, and could lead to more effective policy responses

An explosion of cryptoassets – whose collective value has grown more than six-fold over the past two years, notwithstanding the recent market setback – to nearly $1.8 trillion, poses a major challenge for policy makers around the world. Does the rise of these digital assets merely reflect tremendous speculative excess, like the notorious Tulip Mania of the 1630s, or is it more appropriate to regard them as something akin to late 1990s dot-coms, which were inflated by speculative fervor but contained the seeds of a valuable technological transformation of our economies and societies?

There is as yet no clear consensus among financial officials about the answer to that question, frustrating efforts to develop coherent legal and regulatory approaches to the sector. Opinion ranges from varying degrees of skepticism about cryptoassets to pragmatic acceptance to outright support. One possible middle ground, explained in this paper, is to regard cryptoassets as being similar to financial assets. While most cryptoassets don’t have claims on cash flows or carry an ownership interest, as conventional stocks and bonds do, major digital assets like Bitcoin are no more volatile than many US equities and enjoy greater market liquidity. If a consensus builds around this middle approach, it could support more effective policy making. 

Download the Paper

Oliver Wyman

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