Wall Street executives include traditional bankers, high-net worth investors and hedge fund managers, among others. All of these individuals are typically among the most active and loudest critics of cryptocurrencies. In fact, according to a CNBC survey, an overwhelming majority of Wall Street associates believe that Bitcoin is in a bubble, while only a few believe that it is priced appropriately.
One of the biggest crypto critics last year was JP Morgan CEO, Jamie Dimon, who went so far as to call the crypto craze “worse than tulip bulbs.” The real-life Wolf of Wall Street, Jordan Belfort, even decried that Bitcoin is a “mirror image of his infamous scam” and Charlie Munger, Warren Buffett’s partner said that he was going to “avoid [crypto] like the plague” because it was “total insanity.”
Although these statements represent the most extreme statements against cryptocurrencies, there are some valid arguments made by these crypto critics that are worth engaging in a debate. Following is a list of the three biggest criticisms of cryptocurrencies and an attempt to explain why those statements are wrong.
1. Cryptocurrencies Have no Value
One of the main criticisms by crypto detractors is that digital coins are neither tangible financial assets nor are they traditional currencies capable of acting as a medium of exchange.
Wall Street execs that share this sentiment include billionaire investor Warren Buffet who attacked Bitcoin last fall saying that Bitcoin could not be “valued” because it is not a “value producing asset.” John Hathaway of Tocqueville Asset Management, called cryptocurrencies “garbage” and said that crypto was worthless in comparison to “real assets” such as gold.
Debunking Crypto Critics
To question whether or not something has an intrinsic value is to question our “valuation system.” It is rather futile to argue that fiat currencies have value and that Bitcoin has no value because value is what we prescribe to something. We have decided to assign value to a $1 bill and at the same time, we have been led to believe that precious metals such as gold are valuable (because we equate shiny hard objects to value). Thus, if we wanted to believe that Bitcoin or other crypto coins have value, then its intrinsic value cannot be questioned.
Secondly, it is unjust to say that Bitcoin is not a medium of exchange or that it is not a store of value. Bitcoin, like other coins, is limited in supply, and economics dictates that when something is scarce and has utility, it is a viable medium of exchange.
2. Governments Will Ban Crypto
Another growing anti-crypto sentiment is that government officials around the world will eventually ban all things crypto. The crypto world is considered to have heinous links to the criminal underworld and is considered to be more susceptible to online attacks. These two factors have caused many government officials to question cryptocurrencies’ legitimacy.
The infamous Jamie Dimon makes our list once again as a Wall Street exec who believes that a crypto ban is due soon as he said,“Right now these crypto things are kind of a novelty. People think they’re kind of neat. But the bigger they get, the more governments are going to close them down.” Another crypto critic takes the shape of Indian Finance Minister, Arjun Jaitley, who said that his country doesn’t consider cryptocurrencies to be “legal tender.”
Debunking Crypto Critics
Although more governmental intervention and tighter regulations are expected in the imminent future, it does not seem likely that governments around the world would shut out crypto altogether. Government officials seem more interested in informing investors about the volatility of the crypto market. Meanwhile other regulators are working to define their jurisdiction over the crypto world.
3. Cryptocurrencies Are Only Good for Speculation
This common criticism of crypto stems from the simple belief that Bitcoin and other coins are in a bubble currently. This bubble argument also indicates that Wall Street execs believe that cryptocurrencies are only speculative in nature and are not good investment tools.
Nouriel Roubini, a prominent economist recently declared that Bitcoin was the “mother of all bubbles favoured by charlatans and swindlers.” Meanwhile, a former Morgan Stanley banker and Yale University senior fellow, Stephen Roach has labelled Bitcoin to be a “toxic concept for investors.” He went on to add, “I’ve never seen a chart of a security where the price really has a vertical pattern to it. And Bitcoin is the most vertical of any pattern I’ve ever seen in my career.”
Debunking Crypto Critics
Last year, Bitcoin registered gains of more than 1,000% and this astronomical trajectory does scream: “bubble” and “volatility.” And yes, it could be argued that “bubbles” are actually quite hard to identify at all. But, the real reason why Wall Street is wrong to write off cryptocurrencies due to the crypto bubble is because there is more to come from the technology that cryptocurrencies are based on – blockchain.
There is more to come from blockchain. More innovation and more changes that can change the shape of finance.
The Reality: Blockchain Will Change Finance
The main reason why Wall Street is adamant in their criticism of crypto is because they feel threatened by the new technology. According to experts at NIST, a non-regulatory agency of the U.S. Department of Commerce, the financial industry is most likely to be transformed by blockchain.
This change is already happening. At Celsius Network, we don’t believe in near-zero savings account rates nor do we believe in high lending rates at traditional big banks. That is why we created a platform to make it easier to attain loans and to earn higher returns. We intend to make it easier for our members to get loans and earn up to 9% annual interest on their cryptocurrency holdings.