I think the mistake here is seeing cryptocurrency as an investment. That's not what it's for. It's a currency used to pay for goods and services. The rise in its value comes directly with the freedom to use it to pay for goods and services that avoid government/corporate malfeasance and liberate commerce.
For example, I can get a drug that I have a legitimate RX for through the (regulatory) captured corrupt American healthcare system at 100x markup, or I can buy high quality generics on a darknet market for pennies per pill.
Another example: Monero is a privacy coin that is designed to be untraceable, and Mullvad (VPN) "Privacy is a universal right" offers a 10% discount for Monero, Bitcoin and Bitcoin cash. Fantastic utility for people looking to break out of oppressive government firewalls and spying.
I think cryptocurrency is a massive boon for humanity. And treating it like an investment is foolhardy. It's a currency. If you don't have a plan to spend it, why would you mine or buy it?
I saw all this coming when Bitcoin first came out and I remember thinking it was expensive at $6/BTC. If I'd kept half of what I bought back then I'd be a multimillionaire today, but if I'd kept it, it might not have become as valuable as it is today either. The value of a currency comes from using it, not hoarding it.
>Maybe governmental regulations of this will change my view.
Government regulations spurred on by the regulatory capture and oligarchy designed to squash the little guy are the a huge problem.
Well, if crypto is meant to be used as a method of investment, then sorry, nothing which does not generate rent can be a viable method of investment (can sometimes be a method of preserving wealth e.g. gold but even that barely). In this sense, i agree with you.
But crypto is also very useful for undermining governments - making them unnecessary. Which is a beneficial thing for all humankind. Whenever government realises it is not necessary and can be circumvented with no way to fight back - it becomes more flexible (example: legalisation of weed).
Crypto makes the world more free. Freedom is a universal value.
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.
I generally agree with the article. I would say that people using "crypto" as a hedge against inflation are sorely mistaken as the correlation with inflation is probably incredibly low. It's too volatile to be a store of wealth. It has no intrinsic value. It's incredibly resource inefficient. It's not an "investment" since it doesn't produce anything, and financially it has performed worse than real investments.
The only thing it does have going for it is a perfect pump and dump economics. Crypto "believers" are really only truly believing in this ponzi scheme economics, which is a shame since they'd make more money by using real financial instruments. If crypto was really so good, we shouldn't have to worry about "investing" in it, we'd all just buy some to use it for day to day transactions. Which categorically is not viable at all any time soon.
I've wasted enough time on this site explaining my position. Too few care about overcoming their own bias. However, one more time:
* Yes, cryptocurrency is overvalued with respect to its current adoption. That doesn't make it a ponzi scheme, tulip mania, etc.
* Yes, a LOT of people are more interested in getting rich from crypto than they are in the real benefits of decentralized finance. That doesn't mean there is absolutely no underlying utility
* Yes, current volatility impairs its value as a 'currency' for most people, however this will stabilize over time as adoption increases.
My nuanced opinion as to the value of (some) cryptocurrencies: Forced, un-directed inflationary monetary policy leads to wasteful spending and low standards with regards to investments. This is meant to preserve economic growth at all costs, but people refuse to consider the idea that economic growth at all costs may not always be beneficial for society over longer timelines. It somewhat makes sense in a vacuum, but not when you need to consider issues like climate change and institutional corruption.
If you believe this like I do, you don't want your money to be continually devalued to prop up failing financial institutions, nor to feed multi-sector speculative bubbles, nor to prop up (by way of low interest rates) poor investments. However, the FED cannot be trusted not to devalue money to preserve short-term economic stability. In fact, people in general cannot be trusted with this.
That is the value of cryptocurrency, to me anyway. It cannot be unilaterally tampered with. That is enough of a value proposition for me to prefer it over fiat.
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.
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.
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.
To be clear, what I said was that the real-world uses of crypto-as-a-medium-of-exchange are almost all tied to criminal activity.
I didn't say anything at all about crypto-as-a-store-of-value. Like any fiat currency, crypto has value iff people think it has value, no surprises there. At the moment, crypto's value is heavily tied to speculation about massive increases in its future value, which is not sustainable in the long term and is the biggest blocker for the medium-of-exchange usecase.
I have nothing against the idea of crypto - it's a good idea, especially with the stuff built on top of it around smart contracts, and the technology is neat - but until it stabilizes at predictable exchange rates it will never be used by the unsophisticated masses as a medium of exchange.
It's a political experiment centred around replacing the existing financial system.
And the mistake there is that people in the crypto space are ignorant about how that world works. Namely that there is such a large overlap with the government that you're in essence trying to disrupt governments. Which is a losing battle.
Crypto is a delusion. It's a very bad idea to move money into an 'asset' that has no value other than to the degree other people share that delusion.
Real-estate is valuable on some level, so are most other assets - even 'currencies', however poorly managed, are valuable because people need them to do stuff.
The worst place to go is crypto, it's the bottom of the 'store of value' equation in almost every way - the fact that the government would wipe them out immediately being just one of many risks.
Cypto, at least the way they exist today, have no rational place in anything other than for entertainment and intellectual speculation.
Most of us were very interested in cryptocurrencies at some point in our lives. At some point, we have to accept that things are not what we think they could or should be. They're just what they are.
If I build weapons for freedom fighters, but they're used to massacre civilians, I'm not bravely aiding the people's revolution, I'm just an arms dealer for a terrorist group.
If I build a decentralised cryptographically verified ledger to provide trustable alternatives to traditional banking, but it's used to trick people into spending millions on digital receipts for ugly monkeys, I'm not disrupting the corrupt banking oligarchies, I'm just running an elaborate technological grift.
I believe many people are against using crypto currencies as an investment opportunity instead of a technology solution.
The primary property of a good currency is stability. The crypto currencies are exactly the opposite.
I like smart contracts but I don't think public/permission-less blockchains are feasible/very useful in the real world. Engaging in a tech and electricity spending race doesn't look like a good way to verify transactions and protect the blockchain against attacks.
How so many people overlook this, I'm surprised by. Everyone at every level has been distracted by cryptocurrency being either a way to make money or an investment scheme. It'd be nice if it could be those things, but there are already other systems of actual investment. On the other hand, cryptocurrency, whether or not you hate them for their energy consumption, provide a means of independent economies being created outside of whatever regimes are in control. But that's boring.
Then again, hopefully we'll never need to see a future where everyone values the decentralized nature of crypto more than its monetary value at any given moment. If that happens, it might be under a regime where sneezing in public or looking in the wrong direction would lose you enough social credit that your bank account gets terminated.
No, it isn't. Cryptocurrencies in this aspect are the same as the fiat money you and I use today.
The problem was everyone deciding to brand Bitcoin as an investment vehicle instead of as a currency.
Cryptocurrencies are money. The benefits are immediately realizable. If I gave you $5 in exchange for a service worth more than $10, promising that due to market forces that $5 would soon have the buying power of $10, you would laugh in my face and demand the $10 immediately, not later. Yet somehow we decided this was OK to do with crypto.
It has to do with a lack of knowledge, partially due to world governments initially being hostile towards crypto and then indifferent.
Were this technology correctly introduced to society by trusted parties with regulated information, we wouldn't be having this conversation about whether or not cryptocurrency is flawed due to an inherent volatility that comes with low market adoption.
You don't find crypto useful or worthwhile because you're privileged enough to:
- Be banked;
- Live in a country with a somewhat stable currency, in which exchanging to another currency is legal;
- Live under a regime that does not impose authoritarian censorship on whom you can exchange value with;
- Use payment processors that only abuse your privacy when you aren't looking.
These conditions are not the case for everyone, everywhere. Is it so difficult for you to imagine that:
- Crypto, once matured, could enable the ~2 billion people that are unbanked to own their own money?
- Someone living in a country with a hyperinflationary currency, that bans currency conversions and precious metals, would like to use crypto to preserve their life's savings?
- Someone might want to donate to an entity opposing an authoritarian, human-rights abusing government, without painting a target on their back? (And no, we both know lawyers are not viable for this.)
Throughout human history, there has not been a single government that has not egregiously failed its people or abused/destroyed the wealth of its citizens.
You seem to think that we have arrived at some special time where this will never happen again. That is not the case. Encryption protects your speech, and cryptocurrency protects your wealth, from governments that will inevitably fail you as surely as the sun will rise.
For example, I can get a drug that I have a legitimate RX for through the (regulatory) captured corrupt American healthcare system at 100x markup, or I can buy high quality generics on a darknet market for pennies per pill.
Another example: Monero is a privacy coin that is designed to be untraceable, and Mullvad (VPN) "Privacy is a universal right" offers a 10% discount for Monero, Bitcoin and Bitcoin cash. Fantastic utility for people looking to break out of oppressive government firewalls and spying.
I think cryptocurrency is a massive boon for humanity. And treating it like an investment is foolhardy. It's a currency. If you don't have a plan to spend it, why would you mine or buy it?
I saw all this coming when Bitcoin first came out and I remember thinking it was expensive at $6/BTC. If I'd kept half of what I bought back then I'd be a multimillionaire today, but if I'd kept it, it might not have become as valuable as it is today either. The value of a currency comes from using it, not hoarding it.
>Maybe governmental regulations of this will change my view.
Government regulations spurred on by the regulatory capture and oligarchy designed to squash the little guy are the a huge problem.
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