Hedge Clippings | Friday, 26 November 2021
Crypto: Fad, the Future, or Forever?
Last week's Hedge Clippings reflected on the different views on cryptocurrencies, with the RBA's outgoing Head of Payments Policy, Toby Richards considering them a fad, while the CBA's Matt Comyn putting his (or at least his shareholders') money where his mouth is or was, by both embracing and investing in the sector, even if not in a coin of its own.
We suspect that time will come however, and not in the too distant future. Meanwhile, this week the Financial Services Minister, Jane Hume weighed into the argument in no uncertain terms, saying crypto is not a fad, albeit that people should proceed with some caution. Which of course is by nature where the RBA's views on most things come from.
Hedge Clipping's view is that markets being markets, and human nature being what it is, Crypto is here to stay. That doesn't mean it won't evolve further in the future - as it has done over its relatively brief past. In fact, as it is a cross between a currency and technology, it is bound to do so.
Which is what we think Minister Hume was getting at. Technology by definition evolves, and if you hadn't noticed, the pace of that technological evolution is accelerating. Sony's Walkman evolved - or were replaced by the iPod, which was replaced by the iPhone. Steam was replaced by the internal combustion engine, which will be replaced by battery driven electric vehicles, and no doubt, in due course by hydrogen - or whatever comes after that.
Technology needs evangelists, and crypto is not short of those, although understanding them and "crypto speak" is not for the faint hearted. However much we try, some of the lingo is akin to Swahili, even though we believe in the future. Maybe it would be easier if we were 30 or 40 years younger, or had accepted that wearing a baseball cap, back to front, while inside, was a cool thing to do, rather than something to make you look stupid.
Crypto will become mainstream when the mainstream is able to understand it, and/or when it is easy enough to access and use - hence why CBA is no doubt wanting to be at the front of the crypto ATM queue. Except nobody really uses ATM's anymore, having switched to Apply pay, or waving a magic watch at the checkout counter.
Critics of crypto can find plenty of reasons to condemn it - its use by criminals, lack of regulation, risk etc. But at the end of the day the reason most of them are critical is that either they don't understand it, or can't work out how to do so, or are (rightfully) scared of the volatility risk. Of course with no volatility, much of the trading potential evaporates.
In the meantime there are going to be the early adopters - arguably 20% of the population according to some of the evangelists - prepared to take the risk, or for those still interested, but less risk inclined, who will explore further or invest via the increasing number of managed funds, LIC's or ETF's either investing directly or in the technology or infrastructure behind it.
Some will be driven to invest by FOMO. But whether a Fad, the Future, or otherwise, our view is it will be Forever - until replaced - like the Walkman - via the forces of technological evolution.
Which reminds us of the old saying - "unless you can embrace change as it is happening, you will be left behind trying to play catch up". And it is worth remembering Thomas Watson, head and founder of IBM, who is reported to have once predicted that the world would only need five computers...
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