A major and perhaps final devastating blow was dealt to bitcoin this past week. No, it was not the US Securities & Exchanges Commission’s decision to deny a bitcoin ETF. No it was not some money laundering scheme. And no, it was not a crackdown by a central government (China) on bitcoin exchanges. Rather, bitcoin was (or may be) done in by its very own; the developers of bitcoin. It seems there are rival factions within the developers and miners that want a hard fork (a ‘spin off’) of the bitcoin protocol into Bitcoin Core and Bitcoin Unlimited. The long rise to credibility, acceptance and viability has just been reversed.
Now please know that I am not a fanatical anti-cryptocurrency type radical. In total contrast, I have been an extremely strong advocate of bitcoin. I have written, posted, supported and sung the praises of bitcoin to all who would listen. I have had a $2500 price target for “the coin”, began a discussion that bitcoin was a alternative for gold as a new “safe haven” and even employed a long bitcoin/short gold trade strategy. So, with decades of experience in the trading and asset management business I can’t stress enough that trust is not to be taken lightly. The developers of bitcoin have broken my trust and I have recommended that anyone with a bitcoin position should close it out and wait until there is some clarity on these developments.
In the financial world there is absolutely no way any investor, money manager, hedge fund, etc can take long term positions in bitcoin (or any cryptocurrency) with the unforeseen threat that somewhere a group of developers/miners/coders can just decide to do a “hard fork” or introduce a variation of an asset class that has just gained acceptance. There is a fiduciary responsibility that must be adhered to. This form of risk of “politicizing” can’t be quantified or hedged.
By threatening to introduce a separate bitcoin (Bitcoin Unlimited) the group(s) has done the the ultimate ‘disruption’……..to their own creation. The CME (Chicago Mercantile Exchange) with their partner Crypto Facilities (London based execution & hedging platform), the Winklevoss brothers, bitcoin ATM manufacturers, governments and on and on certainly must be greatly disappointed and let down. Many will say what’s the big deal, its just another variation that will develop a following and perhaps be THE ‘winning’ digital currency to find worldwide acceptance. Or, until another variation is introduced. Rinse and repeat. How can any business plan and invest in something that can change on a whim?
I truly believed that Bitcoin was going to be the established cryptocurrency, accepted worldwide and revolutionizing how trade would be conducted. An alternative to a country’s fiat currency. A safe haven for crisis’s. A new digital threat to central banks striking ‘fear and angst’ in their board rooms. Alas, bitcoin is now just another failing fiat currency. Think I’m wrong? What would happen if, here in the U.S., all of a sudden there were a “hard fork” and there was now a “Republican Dollar” and a “Democratic Dollar?” Merchants would accept the “RD” or “DD” depending on their political beliefs. How would the world react? How would trade be done? Answer? Not so well (understatement).
Is there a solution and will bitcoin (and all cryptocurrencies) overcome this ultimate disruption? I am not optimistic only because the very structure of all digital currencies with its distributed ledger is totally dependent on individual factions all being on the “same page”. That goes against human nature. My trust has been lost.
By Bill Taylor-CEO, FintekNews & CIO, TLC Capital Group