If you are a Bitcoin enthusiast and are following the related news regularly, you would have noticed the extremely wide views by the top brass of leading institutions. It actually becomes very confusing, especially for starters, when someone like Jamie Dimon, CEO of JP Morgan, calls it a ‘fraud’ while some Silicon Valley based veteran like John McAfee is so bullish and projecting it to go to the moon (USD 1000,000 per coin) in just 4-5 years.
Nevertheless, if you try to analyze rationally, you can actually categorize the views into two different schools of thoughts. One school belongs to the Wall Street professionals, especially the CXOs and Strategists, who are managing bulge bracket investment and Chief Economists. They live on fiat money and more importantly are part of the most regulated industry. Their world revolves so much around the central banks (‘Federal Reserve in the US or RBI in India) and the governments that they can’t get in terms with any technology-based innovation challenging this system. On the other side, technology enthusiasts are by default disruptors and live on bringing game-changing innovations. Further, they are able to understand the underlying blockchain technology very well and appreciate its wide applications.
The very reason of Bitcoin’s existence challenges the financial institutions so there is an inherent conflict for the CXOs of the financial institutions. And its quite possible that Investment Banks’ CEOs and Strategist including Jamie Dimon of JP Morgan, Vanguard Founder Jack Bogle, Nobel Prize winner Professor Joseph E Stiglitz etc. are downplaying Bitcoin which has become competition for the global banking institutions. Despite harsh criticism from them, it has been noted that most of the banks including JP Morgan have traded Bitcoin and continue to show their intent to participate in the upcoming futures of CME exchange and CBOE.
While there has been significant adoption of supporting technology in financial institutions to improve their processes, there have not been groundbreaking technology disruptions in decades.
Technology brings a new disruption every 15 – 20 years – personal computers in the 1980s, internet in 1990s, mobile in 2000s and since then this seems to be the biggest disruption and probably bigger than them all. Who would have thought in the 1980s that computers would be an every home affair or internet and mobiles would connect the whole world in the 2000s. Similarly, its very hard to imagine mobiles that Bitcoin shall grant the power to create money to every individual on earth and take it away from the governments, kings or oligarchs. Blockchain technology targets to be the biggest disruptions in the history of mankind. Bitcoin is the first application of Blockchain, introduced simultaneously by the founder – Satoshi Nakamoto.
And there is enough happening on the ground….The Enterprise Ethereum Alliance combining forces of Fortune 500 companies, governments, startups, etc. declared earlier this year brings together the massive investment that world banks are making in blockchain technology; distressed countries like Venezuela, Argentina, Zimbabwe, significantly adopting Bitcoin; and the interest from countries like Russia, China, and many others to launch their own digital currency because it’s cheap, faster and more secure than current financial technologies.
The way I see there are only two possibilities which can hurt Bitcoin price, either an exchange getting hacked like Mt. Gox in 2013 which could have a short-term impact, or large governments taking a very strong stance against Bitcoin could have a medium-term impact. However, in the long term Bitcoin should be able to withhold any of this as we have any way seen in September when Chinese government imposed a ban on domestic Bitcoin exchanges and Bitcoin price reverted back with a matter of few days. China used to represent 80% of the trading volume a couple of years back and all this has now moved to South Korea and the US.
If China can’t stop Bitcoin, then I really think nobody else can. Period
PS: I am personally a strong believer of Bitcoin and Blockchain technology so my views can be biased. I believe that Bitcoin is more technology than finance. It’s actually an application of technology on finance with a very fundamentally strong technology as its core. Your investment decision essentially depends on the call that you need to take on which school of thought you want to go with.
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