Latest Thoughts on Crypto

In my opinion, there are no reliable sources on what's going to happen in the mid to long-term with crypto currencies. The crypto world is home to thousands of people who offer insights about where the market will go, but I have never come across anybody who has any solid foundation for their theorizing. I don't mean to denigrate the opinions out there. There are lots of opinions, which are interesting and insightful. I do just don't think anybody currently understands the long-term behavior of the crypto beast.

The reason for this is simple: this class of assets in brand new, and it's totally unclear what its actual value (cold hard utility as a store of value, a method of account, and a method of exchange). Crypto currencies are not backed by revenue streams or the full faith and credit of any business or government, and this makes it even more difficult to objectively calculate the non-speculative value of these assets.

So, nobody knows how much of the crypto currency market's market cap is linked to actual, durable utility, and how much is pure ephemeral speculation.

Now that I've made this long disclaimer about the limits of knowing the direction of the crypto market, let me give a brief rundown of my opinion on where the market's going:

I do believe that the market for crypto is driven mostly by speculators (as opposed to people who actually use the currencies as currencies - for transacting). I'd bet that about 90% of all crypto currency in existence is used for investment/speculation purposes, rather than being used as currency.

This fact leads me to believe that the crypto market, while it may continue to grow for a short or long period, will inevitably retrench. The enthusiasm surrounding crypto currencies is based entirely on the expectation that they will continue to rise in value. It is hard for me to imagine that this enthusiasm will transition painlessly into a stabilized value. I think when the speculative fad ends--and mark my words, it will end eventually--crypto values will tumble hard.

Some may dismiss this as "FUD." Sorry guys, anybody who doesn't admit that there IS uncertainty associated with the crypto market is misguided.

I do not, however, believe that cryptos will be down for the count. I think there will be a few, or maybe even a lot, that recover. Once the extreme volatility of the present market subsides, I think there will be more and more businesses and institutions that begin using crypto. The speculative madness occurring presently is actually holding cryptos back - companies hate accepting volatile currencies as payment.

In the distant term, I also think cryptos may replace some national fiat currencies. And this is a good thing. It's nice that the contents of your checking/savings accounts won't become worthless if your government collapses.

In short, I think it makes sense to keep some money in crypto (probably the bigger ones - my preference has always been Ripple). I think there's a strong chance that the market will undergo a very bearish period at some point in the next year or two. However, I believe it will recover, prices will stabilize, and this stability will lead to wider adoption.

As always, this is subject to debate, and I don't hold myself out as some kind of guru. Thanks for reading!