Okay, I need to take a break from calling down bitcoin from lofty heights to say $13,000. I need to write a strategy piece, that no one will read but will answer the question: is crypto a “hula hoop” or not, because people are asking.
In a boom or a crash there is only one call to make. Is the asset real or is it a pile of junk going through the cycle of boom and doom of public market promotion that the audience love to gamble on but actually aren’t a long-term asset?
This call is as fundamental for crypto as it was for the dotcom boomsters or the Nifty Fiftyers or the Tulip-Bulbers of yore.
Many people believe, especially now that bitcoin is crashing, that crypto has no “intrinsic” value. You can confection up what intrinsic means, but that question boils down to: Is crypto a pile of worthless poop?
Like any good exam exercise, the answer is in the question. Even manure has intrinsic value.
Crypto has a value because it has a use case.
Crypto has plenty more use cases than horse dung and many are way more important than growing roses.
At the very base, any cockroach you can back in a race has a value because anything a human can bet on has a lot of utility and the difference between a Kentucky yearling in a $100 billion dollar a year racing industry and a cheap supply of excellent burger meat is simply down to the use case of speculation, and we know there is a mighty amount of gambling on the price of crypto. At 1x sales, racehorses have an intrinsic value of $100 billion, with bitcoin, a revolutionary technology, only worth 3 times that of transportation technology 100 years obsolete.
Meanwhile, the “black economy” is somewhere between 10% of total global GDP in developed nations and 40% is those crazy developing economies where financial anarchy rules. How much intrinsic value for crypto is that? BTW there is about $1.5 trillion dollars of “fiat” banknote cash circulating in the black economy, so crypto is a sideshow when it comes to nefarious transactions. Heaven knows how many untold trillions of “dodgy”’ fiat money is happily swimming around inside the banking system, so don’t begrudge crypto intrinsic value from that.
But speculation and criminal activity is just a tiny sliver of the intrinsic value of crypto.
The biggest value is inherent in its challenge to incumbent rent seekers. Like, as a small example, banks.
Have you noticed how banks have got their game on since bitcoin broke into the public consciousness? Gone are three day transfers, hello instant payments. You can feel the best banks adapting to the new reality of crypto and fintech. The finance of old is now ‘TradFi’ and likely to be as popular in due course as ‘Trad jazz.’ It will be quaint but no longer top of the pops.
The banking example is just the tip of an iceberg, and that iceberg is going to sink a lot of market abusive oligopolies, and when you go looking for them they are everywhere. Crypto is the death of gatekeepers, which is why gatekeepers don’t like crypto, and gatekeepers have a lot of power to push back. Sadly for them and happily for us, you can’t put new technology back in its box. Crypto cannot be un-invented and at every level if crypto is not adopted then the laggards will, like the horse as transport, go obsolete.
What won’t be ‘crypto’ in 20 years?
On the top of that crypto world will likely still sit bitcoin
Even if it doesn’t it will be some other crypto, one that will start out as nuppence and go to the moon.
CBDCs (central bank digital currencies) will not catch up because they can never be programmable money. It might take a century for a country to risk its whole economy on the unlikely prospect of there being no bugs or hacks in their sovereign currency, so private crypto will dominate future development.
In a world where many people still think paper money is trash and that gold is the only currency, more than 1,000 years since some bright spark came up with the idea, it is not surprising that a lot of people think crypto is garbage, especially during a crash. However, in a world where cow manure, or BS to most of us, is worth $20 a ton, tokens that unlock applications like DeFi, NFTs, the Metaverse, a punt on the next moon, some quality vape, while beginning to turn the world of commerce and governance upside down, can, will and deserve to command a percentage point or two of the $200 trillion market cap of capital markets.