Birth Of An Asset Class - Cryptocurrency

I've been advocating bitcoin for a while now (+125% in 2016, +35% 2015) and I'll make a bold prediction: bitcoin will do even better in 2017 than it did in 2016. But bitcoin is the tip of the iceberg.  Recently I've dived much more deeply into the cryptocurrency landscape and gained a greater understanding of its breadth. Public blockchains are introducing entirely new business models to the world.

The tech and banking industries took notice a few years ago, and now every large bank and tech company is engaged with blockchain technology to varying degrees. In 2017, it's the investment industry's turn. Every conference I've attended in the past year for pension and endowment investors included a presentation on blockchains and cryptocurrencies. We're reaching critical mass and I think 2017 will finally see institutional investors tiptoeing in to the space.  

Let me take a big step back. Why are cryptocurrencies valuable?  

Cryptocurrencies fall into 3 general categories:

1. Store of value - Bitcoin is currently king of this category.  The value propositions are: 

  a.  Can't be seized - to "own" cryptocurrency means to know an address associated with it (e.g. 47aH83hak83Hjkdoah8). I can encrypt that address with an easy to remember password, and email the encrypted address to myself at yahoo and google and microsoft email addresses so they're stored on cloud servers and accessible anywhere. That encrypted address gives me access to my money but it's worthless to anyone without the password needed to decrypt it. No government official or judge can confiscate my money unless I tell them my password. Cryptocurrency is the only asset to ever exist that can't be seized. There's tremendous natural demand for an un-seizable asset; if only for this reason, cryptocurrency will appreciate in value.

  b.  Inherently deflationary - in a world of rampant money printing, this is a major attraction of "store of value" assets including precious metals and cryptocurrency.

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Chee Hin Teh 4 years ago Member's comment

Thanks for sharing