Man Group CEO Luke Ellis Talks Blockchain and Making Money in Volatile Crypto Markets

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Mr. Ellis said there was no evidence that the much-hyped distributed ledger or blockchain technology that underpins cryptocurrencies has any real benefits to society or the economy. I have yet to see a practical implementation of blockchain as a real technology where it has made a difference in how things work, he said. I will believe that the technology might have some value when I see the proof of it.

The comments contradict the fashionable convention among corporate executives to extol the virtues of blockchain, while condemning the speculative nature of spot markets for crypto tokens.

In a submission to the Treasury dated June and published last month, Commonwealth Bank argued that there is great potential arising from crypto assets and distributed ledger technology. CBA, alongside ANZ and Westpac, is an investor in the Lygon project, which is moving paper-based bank guarantees to blockchain.

Blockchain technology, which records transactions immutably and verifiably, has been variously recognized for its ability to help fight corruption, climate change and even cancer.

Commenting on the collapse of FTX in which an estimated one million people, including 30,000 Australians, lost money, Mr Ellis said the incident highlighted a widespread misunderstanding about the nature of the exchanges. crypto assets through digital exchanges, also known as hot wallets.

If you are trading cryptocurrencies in a hot wallet, you are not trading cryptocurrencies, you are not trading on the blockchain, what you are trading is a delta one derivative with a counterparty, he said. (A delta one derivative moves in relation to the underlying physical asset).

Now it’s OK. I like derivatives, I built my career on them, but you have to understand counterparty risk.

The simple act of storing crypto assets offline in a so-called cold wallet, as anecdotal evidence suggests a growing number of crypto investors are choosing to do, does not present a solution, but simply introduces different counterparty risks. investors should be aware of, he told me.

More generally, Mr. Ellis said the incredible increase in the value of bitcoin crypto assets that has jumped over 5,000% since 2015, despite falling 60% in the 12 months to December, was a function of the era of cheap money supported by monetary policy. .

He said an environment where kids in their bedrooms can outplay professional investors was not the norm in historical markets, something Man Groups data analysts are tasked with assessing.

The past 12 years since the financial crisis have been, I think, the easiest time for an investor the world has ever seen, he said.

The truth is: you just had to buy something, it didn’t matter what you bought. The more you bought, the better off you got. The more leverage you put into it, or the more leverage there was, the more speculative it was, the better.

I imagine the next five years will be very different.

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