Had a glass of wine with a former boss of mine who is managing a multi-billion fund these days. Besides the usual "how's health Sle? glad to see you're not dead yet" banter, the topic of crypto currencies came up. I was primarily listening, he dude is much smarter and/or wiser than myself. Here are the highlights: (a) he is flat (he said one of his kids has a dozen coins), so he said "speaking as someone who has no risk on" that cryptos are here to stay (b) BTC is the worst nightmare for any country trying to implement capital controls. It's common accepted tender, easy to purchase and sell, very easy to transport etc. Making it illegal will drive it underground, but if anything, will increase it allure for the EM residents. (c) Point (b) makes it a perfect economic weapon for the countries interested in counteracting the rising EM powers (BRIC) and because of that it's unlikely we will see extreme regulation in the near future (d) The whole electronic gold concept is highly disruptive and people tend to underestimate the long-term convexity of the disruptive technologies. (e) A single crypto will eventually win, it has the aggregator qualities and eventually people will migrate to a single coin. No idea which one and it's not going to be the one with superior tech, but the one that's most trusted. (f) Prices gotta fall from here, simply because the mental infrastructure is not ready yet. We are likely to see some big swings in overall crypto market and will have a lot of people selling on the lows and regretting it later (reference the old joke about the Amazon in 2002 and the beer). Long term target is much higher. To be honest, his views contradict my thought process that bitcoin will be the next boring asset (gold, credit, etc), but as I said, he's worth listening too.
When crypto currencies get boring, they start serving their touted function, as a transaction medium. This is disregarding other uses, both transparent and not, as each new distributed application can be attributed any/unknown qualities and side-effects. The question is wether a transaction medium can have no fundamental value, and what maintains stability, security and can even prevent catastrophic failures from ripping markets apart. Who will be able to save people from eachother at the next fubar situation? No accountability spells future disaster, just a matter of time and opportunity.
Counterpoints to OP's highlights: a/ Just because he is good at managing money, he is not an expert on the future of a new technology. Well, nobody is. b/ Making it illegal makes it impossible to use for institutions and retailers. But maybe making it untrustable is easier or making a competing currency what they control takes away the power. If you can't kill, them join them. c./ Instead of extreme regulation, what if they just block the intended use (currency) as did the Chinese and Indian government already? So cryptos can exist they just can not be used as legal tender. 1/3rd of the world already has this ban, I don't see why this can not be implemented in other countries. e/ I don't see the reason why should be just 1 winner eventually. There are Windows, Apple OS, Linux and Chrome, one OS didn't win it all. So there could be one crypto for speculation with no other value (BTC) one for actual payments (LTC) and one for true anonymity (Monero). Different cryptos for specific needs. I think your friend is really wrong on this one. There is absolutely no reason why different cryptos couldn't coexist and eventually survive. f/ I have to agree, we are living the 90s all over again. 2018 will be the great awakening. But there is a simpler reason, too much supply, eventually even the world will run out of new money. It will take longer, but it will happen... What is an EM resident?
No, he is not, but he is reasonably good at understanding the various market and economic factors. Individuals who mostly suck at everything (like myself) might improve by listening and internalizing the opinions of others. Especially when those people are truly good at what they do. Even if it happens on the internet and the knee-jerk reaction is to argue instead.
People much smarter than I am seem to be enamored of Bitcoin and other cryptocurrencies. I guess I'm just not likely to ever be that smart. I just don't get it. Judging by the rapidity of its ascent and the lack of an underlying basis for its doing so, at least not one that I can understand, it has all of the markings of a craze. And I suppose that it can be be a fun joyride until the concrete wall just around one corner or another. If I had to bet a dollar, I'd be inclined to bet that it won't end well.
I don't have any and have no opinion but this is an interesting take by Louis Borsellino who was one of the big dogs in the S&P pit. https://www.linkedin.com/pulse/bit-coin-irrational-exuberance-lewis-j-borsellino/
I thought the economic weapon point was interesting. Otherwise, it’s very common sense. The final idea of “if you don’t have any BTC - buy some because it could be crazy convex; if you have a lot of BTC - lighten up because it could be a wild ride” is more or less investments 101.