MONEY NEWS 14.11.2017
In this interview with Ross Greenwood, Roger discusses Bitcoin. Given there are hundreds to crypto currencies why would Bitcoin be the one to survive?
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
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Jon E
:
I find the concept of the “store of value” interesting when looking at cryptocurrencies, in particular bitcoin, vs traditional FIAT currencies. for example, since moving off the gold standard and through Quantitative easing we have seen the loss of a large amount of buying power through inflation. So i struggle with traditional currencies as a long term store of value as it’s a guaranteed loss of value over any decent horizon.
Bitcoin having a maximum number of coins being created in naturally deflationary (as BTC disappears over time as people forget/misplace wallets etc) It will be interesting to see how it performs over the long term as a Money system or if precious metals and collectables maintain their status as long term value stores.
I don’t see how people can expect the current speculation fueled bubble to continue at these rates and i’m curious to see how it performs in a recession/depression as a store of value, but the other systemtemic and technical risks aside i can see a crypto (Hopefully BTC) coming out as a reserve money. and other crypto’s having niche use cases (Ripple, Ether etc).
What’s your thoughts on FIAT vs Crypto vs other assets as non speculative/investment but purely stores of value in a time where all this currency printing is occurring?
Paul
:
The reason why Bitcoin is the most likely cryptocurrency to succeed is its first mover advantage and its network effects. Like any platform or protocol, the more users it has the more valuable it becomes. Bitcoin has at least six network effects:
1. Liquidity & Volume – No other crypto aside from Ethereum is large enough to have OTC trading or allow millionaires to buy in, and no other crypto aside from Ethereum is listed on virtually every crypto exchange in the world.
2. Merchant & User adoption – bitcoin has the largest number of merchants accepting it esp in Japan
3. Security – bitcoin has the largest mining power of any cryptocurrency securing the network. Last I checked it was something like 40000x stronger than the top 500 supercomputers in the world combined.
4. Nodes – bitcoin has the largest number of computers downloading and verifying the bitcoin blockchain, something in the order of 50000+
5. Developers – bitcoin has the largest (and best) development community building wallets, exchanges, second layer payment platforms, and working on the bitcoin protocol itself. All of the legends of the cypherpunk world (e.g. Adam Back, Bram Cohen, Nick Szabo) are all working on bitcoin.
6. Financial Products – bitcoin, because of its liquidity, is also the only crypto with derivatives trading. And in about a month the CME is launching cash settled bitcoin futures
If you watch the price action it is clear that bitcoin is the reserve currency of the crypto world – it trades against all of the other altcoins together. Any competitor is going to need to be a Quantum Leap better in order to overcome all of these network effects. I would argue that if Bitcoin is still the #1 crypto in 4 years then it has probably won.
Now – would I buy into Bitcoin today? Probably not. I was accumulating bitcoin during the long bear market of 2014-2015 when the price dropped from $1200 to $200. I would suggest anyone interested in the future of money to wait for another similarly long bear market before buying in. [NB: I have already taken some profits into this run a few months ago].