Let’s talk about cryptos. Are they going to stay here? Is bitcoin the future?
Well! I am not sure of that and I honestly do not think anyone knows for sure either. However, here is what my speculations and opinions are. I shared them with approx. ten years ago with one of my Morgan Stanley colleagues and since then my opinion has not changed much even after seeing the massive bull run followed by a major crash in cryptos.
1. Cryptos in their current form may not survive. The majority or maybe all of them will fail. There are 1000s of cryptos and the top 100 have decent use cases as published by social media gurus and their white papers. However, are they all going to succeed? Probably not because each of these can be thought of as tech start-ups and we know that the survival rates are very low for start-ups.
2. The technology is sound, reliable and is never going to go away. Blockchain and assisted tech is a game changer and will remain so. It will only get matured with time. It will have much better use cases than the individual cryptos themselves. Its use will be accelerated with AI and 5G tech. Blockchain + AI + Quantum Computing + 5G will be a world changer!
3. The entire cryptos and associated tech are yet to mature and the past decade of cryptos has just been a possible test bed for a better and matured tech for the REAL cryptos.
4. The real-world usability of cryptos will most probably have some credibility and transparency. In my opinion, they will be started and distributed by large tech giants such as Google, Apple, Meta etc. These will be used like normal currencies and will have interoperability. Amazon has a crypto already called Amazon Coins but not using the same tech. But rumours have it that they have been working on it. They indeed have the IT infrastructure (AWS) to support it too. Amazon can bring the best adoption because of their retail market share. META (Facebook) came very close to their crypto project called LIBRA. Their cryptos can be very well integrated into the metaverse for digital payments. That is another adoption case.
5. We already know that the central governments across the world have been experimenting and preparing for their CBDCs. India recently released their CBDC in late 2022. The UK is working on their Digital Sterling. As I said in point 3 above, IMO they have been using the crypto tech and its massive user base as their free test subjects. They will make use of this tech data and emotional behavioural data of people to better their tech and systems. Their favourite test beds possibly are stablecoins.
6. These CBDCs will have interoperability and interconvertibility with corporate Cryptos. This can only be done if the crypto tech is altered to support interoperability. Currently, a large number of major cryptos do not have that design.
7. Corporate and Central Bank cryptos will be faster and cheaper to convert over the network. Few of the major cryptos have high Gas fees and slow network performance.
8. The current crypto market is highly centralised contrary to the general opinion. Yes! highly concentrated and centralised because of the concentration of a large number of coins in the hands of a select few who are anonymous. The top 10,000 individual investors in Bitcoin control about one-third of the cryptocurrency in circulation, according to a study by the National Bureau of Economic Research. This can alter the supply-demand equation at any time and is susceptible to large price movements including crashes. That goes against the decentralisation and “use as a currency” concept on which cryptos are favoured. The Internet is full of “Pump” rooms/groups and social media accounts which are openly involved in creating fictitious supply and demand.
9. Bitcoin may still be there in the future and probably will have a very high valuation but not because of the adoption but rather more as a collectable like a piece of art. Because of its perceived value, it will store value.
10. Call it a conspiracy theory but read on. All that extra dollars that were printed in recent times which were supposed to bring the dollar’s value down, what if those extra dollars get invested in these public cryptos and then those cryptos simply vanish? Check out the FTX and other scams and their possible political links. That will remove the extra supply of dollars and fiats from circulation. Now, this can be a bit farfetched but think about it.
11. For cryptos to be real-use currencies they will need to have their own identities instead of being valued in Dollars or other fiats. The real successful adoption level will be when we will think of the value of something in our physical world in terms of cryptos. At the moment all of us think of cryptos in terms of fiat.
I am not a crypto expert and neither I dare to call myself one. These are just my opinions, speculations, analysis and understanding. What are your thoughts?
Until next time..
Take care
Vik
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