In light of recent euphoria, here’s a compelling bear case.
I’m bullish Bitcoin and Ethereum.
And any technology to redistribute power, resist censorship and preserve privacy.
In light of the current crypto euphoria, I’d like to entertain the best bear case I’ve heard. Paraphrasing Demetri Kofinas, host of Hidden Forces:
The U.S. dollar’s legitimacy comes from the government’s ability to level force and violence. Men with guns can demand your private keys.
When a gun is pointed at our face, will cryptography save us? I’d add, this is true for any nation state.
Demetri’s point is well taken.
I don’t think we can retreat to a digital, decentralized safe haven. Force and violence are routinely used in the real world.
Nation states may go after whales. Some will renounce their citizenship. Money will flow to neutral geographies (see Singapore). Others will resist. Governments could make it very inconvenient to transact in crypto. When push comes to shove, I suspect most will favor convenience and use a Central Bank Digital Currency (see China DCEP).
Under threat of violence, private keys may not matter. What does matter is public crypto-networks continuing to be permission-less; that Bitcoin or Ethereum continue to store value.
I think it’ll be a race to see if governments can stop the entire crypto ecosystem fast enough.
Because if a security team will accept payment in Bitcoin, then it’s not only a hedge against inflation, but also against nation state violence.