CoinDesk's Consensus: Invest 2017 conference attracted hundreds of investors, developers, entrepreneurs, journalists and enthusiasts to New York's Times Square on Nov. 28. A "tragedy," if you ask Financial Times columnist Robin Wigglesworth. The entire audience – "incredibly good-looking, smart people," as he described them – "are wasting all your brainpower" on "complete hokum," the child of the Dutch tulip bubble and the 90s dot-com bubble.
There probably weren't many bitcoin bears at the conference, but Wigglesworth had some backup on a panel moderated by Digital Currency Group director Meltem Demirors. Raoul Pal, the co-founder of Real Vision TV, said he bought bitcoin at $200, sold at $2,000 and – despite the fact that the price was flirting with $10,000 as he spoke – had no regrets. Private blockchains, he argued, are "what the financial system needs." The private sector doesn't want bitcoin or any other token, cryptocurrency or distributed asset, Pal said: "It doesn't need a trustless ledger, it needs a trusted ledger." (Check out our article How Does Bitcoin Work? and our helpful infographic, What is Bitcoin?)
When Demirors pushed back on Pal's private blockchain enthusiasm, asking why companies didn't just use a shared database, he doubled down. "Blockchain is still just a database in the end."
Pal's argument is a popular one: blockchain is "super interesting," while bitcoin is a dud. So is Wigglesworth's: bitcoin is a bubble. He cited the parable of the "trading sardines" to illustrate his point. A shortage of sardines led people to covet them, driving the price up and encouraging a lively trade in sardine cans. At some point, as the bubble inflated, one of the traders decided to sit back and enjoy a can of sardines. They were rancid, and he complained to the person who'd sold them to him. "Matey," the seller responded, "these aren't eating sardines, these are trading sardines." Neither of bitcoin's promises is being fulfilled, Wigglesworth argued: it fails as a medium of exchange because everyone wants to hold on as it rises in price, and it fails as a store of value for much the same reason.
Not surprisingly, these weren't popular opinions at the conference. Murray Stahl, CEO of Horizon Kinetics and a bull on the panel, argued that bitcoin is valuable in part because it is "not debaseable" due to the 21 million-unit cap on total bitcoin supply. The inconvenience of using bitcoin for transactions – high fees, slow processing – doesn't bother him. No one would call Treasury bonds a currency, he said, but they are still a store of value. "Anything can be money," he argued. "It's a matter of consensus," which he said bitcoin is building.
Part of what's holding bitcoin back at the moment, Stahl said, is the bulls' lack of "gravitas." For the moment, most people who have that quality are telling everyone "don't go near [bitcoin]." When they start allowing that cryptocurrencies might be reasonable investments, he said, "then it starts."
Thomas Lee, co-founder of Fundstrat and another bitcoin bull on the panel, sees bitcoin and blockchain as the most important technological developments of the past 20 years. He first bought bitcoin based on his daughter's enthusiasm – "Young people see it as a store of value" – and respect for the Core developers' skill and intelligence. He expects a duopoly to emerge: likely bitcoin and ethereum, though ethereum classic could be a contender, given the conspicuous lack of tension in its mining community.
A panel earlier in the day was comprised exclusively of bulls of one degree or another, who offered other arguments for bitcoin's merit. Michael Novogratz, CEO of Galaxy Investment Partners, compared bitcoin to railroads and the internet – both in terms of their eventual impact and the speculative mania that accompanied their early days. "Bubbles happen around things that change the world," he argued. He recognized that there will be "wild crashes," but said the good companies would "keep chugging along." Novogratz claimed earlier this year that 10% of his net worth was in bitcoin.
Glenn Hutchins, co-founder of North Island and Silver Lake, said "we are in very, very early innings in the development of this technology," comparing bitcoin to a protocol like TCP/IP. Building off that comparison to the internet, he expressed deep skepticism in the blockchain-not-bitcoin thesis: "Private blockchain is kind of silly, kind of like the 'intranet' of old." Private blockchains exist to protect incumbents, he argued, and so that "a 68-year-old director can say 'we have a blockchain strategy, we're on the cutting edge.'" (Related: Banks Claim They're Building Blockchains. They're Not.)
Finding Some Overlap
Enthusiastic as they are, however, the bulls haven't thrown caution to the wind. "This is a project that could fail," Stahl said of bitcoin, adding that monetary policy changes could severely impact the cryptocurrency's price. He also mention his concern about the degree of mining concentration; bitcoin cash is "a token controlled by the miners," he argued, and bitcoin could suffer the same fate. He also worries about the introduction of leverage, "the touchstone of most of the bubbles in the history of the world," to the cryptocurrency market.
Hutchins said bitcoin could "turn out to be Betamax," with some other cryptocurrency claiming the VHS crown. Lee, meanwhile, knows when he would sell: "when pensions start allocating into bitcoin."
Wigglesworth also allowed that his bearish stance comes with caveats. "Gold has been in a 6,000-year bubble," he said. He would never buy bitcoin or any of its crypto ilk, but that doesn't mean the "dumb people" won't pile on and make somebody else money. Even the "explicitly bulls**t" Useless Ethereum Token has a nearly $30,000 market cap.