One issue with crypto is that it doesn't produce any value (it consumes value) and it has no intrinsic value. So as an investment it doesn't make any sense.
IMHO the problem with crypto is the very thing that its proponents cite as one of its key benefits, its decentralised nature.
We are told that crypto is supposedly a way to "stick it to the man", to fight those "evil banks/governments".
The trouble is that unlike fiat currency, there is no fundamental means of valuation. Crypto is worth what its worth on the day based largely or exclusively on entirely non-economic valuation, which is why its so incredibly volatile.
The trouble is that you cannot escape the truth that the world is based on trade. People make goods, people supply services and other people buy goods and buy services. People also buy and sell essential commodities. This happens both domestically and cross-border.
The value of fiat currency is ultimately tied to the economics of global, and therefore provides an objective means to value said currencies, both themselves and relative to other currencies.
You don't get that with crypto.
Well, you could argue that you do to a limited extent, but that limited extent would only make crypto comparible to emerging world fiat currency of some tiny country.... high-frequency boom and bust cycles, high volatility, potential for episodes of illiquidity etc.
Thats one of the very obvious drawbacks.. Money is a store of value, but crypto just tries to 'be' the value, which doesn't go well, because well it's not valuable at all
The problem is the only situations where crypto is more effective than the alternative (a well operated SQL database owned by a bank headquartered in a geopolitically secure jurisdiction with stable courts) is a really shitty one: when you live in a Mad Max world with no stable rule of law.
In other words, it just so happens that the exact situations where crypto is useful, are the same situations where it is very hard for capitalists to earn a good return on their capital. Unstable places or illegal markets.
It's not that the existence of crypto doesn't make sense. It's that investing in it makes no sense, because it will only be successful in scenarios where "investing in things" at all is a lost cause.
I can see where 'no intrinsic value' makes sense. Crypto has uses, but I'm not sure they're what lawmakers are interested in. Unless, of course, they're profiting from them - laundering, hiding, transferring money. But, they can't admit than and leaving things in the grey area might be safer for them. Not sure this issue is enough to sustain interest amongst politicians as it seems too esoteric to hold the attention of the masses.
Crypto as an investment - Not your keys, not your coin.
Crypto as a currency - I can't directly buy food, water, shelter, transportation, energy, or anything fundamental with it.
I know acceptance is growing, but 10+ years later, crypto still has extremely limited acceptance for daily goods and services. It is almost exclusively held as an investment.
The trouble I have is with your claim that cryptocurrency produces "nothing of absolute value at all." I don't know your definition of "value," but it's clearly not one I share.
The hyper-rationalistic world view of this article is striking. Crypto, as an asset class, is easy to understand. It has the same basis as collectables or art: human mimetics, desire and scarcity. If you look for "intrinsic value" you miss a lot of human motivation.
The entire story of crypto is that it’s a somewhat volatile new form of security (I know I said it) that has two disadvantages vs. traditional securities.
1) It lacks the sophisticated financial tools and derivatives that have been developed over the past century
2) It does not have enough volume to keep up with the new sources of arbitrage that come with every new DeFi product (looking at you DEX’s and synthetic stocks!).
Every time a crypto asset “solves” one of those two problems (almost always incompletely) the crypto verse acts like they’ve proven p=np.
The problem with crypto is that instead of speculating on the premise of the actual inovative technology, the speculation is centered around the close money substitute that the technology enabled. Investors bet on crypto-assets themselves, freshly printed private coins, as if they are going to have substantial market dominance in the future to the detriment of state-issued fiat money. That is completely unsound.
It's as if investors in the tech stocks would bet that a single company with an innovative trading solution would come to replace a substantial part / all of the stock market.
The intrinsic value of crypto is that is the first form of electronic cash that isn't a proxy for bank to bank transfers.
It's intrinsic value comes from being an excellent form of currency and store of value - easy to store, fast to send, easy to verify, easy to hold personally, difficult to create more of, etc.. Up until Bitcoin there were not digital forms of money that came close. Physical forms of money are hindered by being physical which means transportation and validation are more complicated.
It's not easy to find a form of money that has all these properties above, Bitcoin and other crypto currencies do which is WHY they are valuable. That is their intrinsic value - being good at being money.
the problem with crypto is that people see it and treat it as an investment and a commodity, not an actual currency. People horde crypto and don't spend it.
What problem does crypto solve apart from being a digital alternative to gold? It's not anonymous (except Monero which is centralized), transaction fees and times tend to be high (depends on which currency and exchange you're using), there's zero recourse for stolen funds currently (which makes it ripe for fraud). And in addition to that, at least for Bitcoin, it's an environmental disaster.
There are crypto networks that does betting. The natural next thing is insurance, which can be considered a special case of betting.
The "harsh" truth might very well be, that a lot of industries that have been governed by priviliged organisations will turn into algorithmically governed DAOs.
A lot of people in the financial sector will probably loose their job, as cheaper alternatives for financial products will occur in self regulated algorithmically governed systems.
The "bitcoin is the crypto definition" view should be abandoned. And it should be understood that crypto means algoritgmically governed economies for now. Later it will be algorithmic governance.
Ie. Cryptos market cap is at least equal to the financial sector. And probably we are only scratching the surface with that statement.
What I dont understand about Crypto is that its supposed to be good for payments, and for keeping a store of value. Both of those business are pretty low margin uninteresting businesses. How can people make billions out of it.
Crypto as a currency could be a truly great asset to the world. Decentralized trustable currencies would offer unique benefits. However no current crypto market is basing it's value on that promise. It's simply speculation and lack of understanding.
Crypto is not an effective currency. Currencies need 3 things to be effective: store of value, unit of account, and medium of exchange. Crypto fails at storing value and being a medium of exchange. It's value is completely unpredictable and transferring it is slow, costly, and annoying. Many of these problems could conceivably be solved, but without government backing crypto will never be a good store of value, as macro economic policy is required to keep currencies stable.
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