The ironic thing about Bitcoin and about cryptocurrencies more generally, is that while proponents consistently use the old “you just don’t get it” defense in an effort to deflect criticism, the most valid criticisms of all are the ones that are based on common sense. That is, you don’t need to “get anything” to know why this is, in all likelihood, doomed to fail.
For us, the most compelling argument against cryptocurrencies is simply that the more of a “threat” to the prevailing order they become, the more inclined governments will be to heavily regulate them or shut them down altogether. You’re already seeing that, most notably in China.
And to the extent the technology – or, the “idea” if you will – is revolutionary and somehow represents “the future” of money, well then you can bet monetary authorities will simply co-opt it and “issue” a government-sponsored version. Indeed, the B.I.S. basically said as much in a their quarterly review. That doesn’t mean they’ll be very “good” at it at first or even that they’ll ever be any good at it – it’s simply to say that’s what will almost invariably happen, because the fact is, governments aren’t just going to relinquish their control over the money supply. That’s not going to happen. As in: never. Sure, empires fall and currencies fail, but outside of that or outside of some dystopian future where we all somehow still have the internet but don’t have governments, there is no way that monetary authorities are going to allow this to supplant the system – no matter how flawed that system surely is.
That – in a nutshell – is Jamie Dimon’s argument and again, you don’t need to “get” anything to understand it. You just have to be willing to listen to that voice in your head called “common sense” which, judging by how far Bitcoin itself has run, the people holding it are running a bit short on. Either that, or they understand this is a “Greater Fool” game, the problem there being that trading strategies based around the “Greater Fool” theory are inherently dangerous because you can never know for sure whether you are the last “fool” in the “Chain of Fools“.
In the meantime, there’s money to be made and where there’s money to be made, folks like Goldman will be there to collect, but the end game here isn’t “Bitcoin takes over the world.” Rather, the end game is probably something like: alternative cryptocurrencies persist as an asset class to whatever degree there’s still some utility there after central banks have launched their own versions.
Well on Friday, Kyle Bass weighed in (because the crypto crowd really wanted to hear from another titan of the “establishment”). “A whole bunch of people are going to lose a lot of money,” Bass told Bloomberg’s Erik Schatzker in an interview, referring to ICOs a lot of which Bass says “you’re going to see go completely broke.”
“A bunch of them are frauds, and that is going to be problematic for all the people that just rushed in,” he adds.
You can watch the clip below. Bass makes a lot of good points which, you should note, all fall into the “common sense” category, proving once again that you don’t have to truly “get it” to know why this isn’t going to be what people say it’s going to be. Also note that Bass doesn’t rule out the idea that they’ll stick around. He just thinks, like we do, that what you’re seeing currently is a mania.
Enjoy (or don’t)…
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