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Where Do Bitcoin and Other Cryptocurrencies Go From Here?

Pete Rizzo, one of the journalists who's been writing about cryptocurrency the longest, answers key questions about the future of bitcoin and other cryptocurrencies.
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Pete Rizzo is uniquely positioned to answer questions about the future of cryptocurrencies, having covered them extensively as a journalist since 2013.

Best known for serving as the editor-in-chief-of leading crypto news site Coindesk from 2014 to 2019, Rizzo is currently an Editor at Bitcoin Magazine and Editor-at-Large at the Kraken cryptocurrency exchange. He is also an advisor to Crypto Investor, a new subscription publication being launched today on TheStreet.

Here he answers questions about what to expect from cryptocurrencies in the coming years, including the significance of Morgan Stanley  (MS) - Get Morgan Stanley Report and Goldman Sachs GS allowing their clients to invest in bitcoin, and whether or not any other cryptocurrencies could eventually supplant bitcoin’s leading position.

What’s the bullish case for bitcoin and crypto in general?

Bitcoin is, first and foremost, an innovation. For the first time in history, it has allowed humanity to manage a money supply without the need for a third-party like a bank or government to maintain or operate it. That has dramatic implications for the global markets, which are dominated today by assets and monies managed by these types of entities.

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Remember, over the last 12 years, bitcoin has grown from being worth nothing to a high of $60,000, but that is only the tip of the iceberg in terms of its potential growth. A moderate longer-term bull outlook for bitcoin would find it taking a place as a dominant money on the global stage.

I believe it helps to view the larger crypto asset market as an attempt to further this innovation in new and interesting (though not always well-intentioned) ways.

What’s the bearish case for bitcoin and crypto?

I’ll start with the caveat that while I find the bear case for bitcoin unlikely, it remains possible it remains a niche asset or that it fails. However, this overlooks both its track record as a monetary asset, as well as the fact that it has arguably created its own cyclical economy.

The bearish case for cryptocurrency, on the other hand, is that the extra features these systems claim will add value, don’t actually work in the ways they intend. For example, Ethereum claims to extend bitcoin’s core innovation, asserting applications will need or want to operate without third parties, while XRP claims banks will need or want to use this type of distributed software system to exchange value.

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This is a bit of an oversimplification, since the underlying claims behind a lot of cryptocurrencies can be hard to pick apart. Still, I think it’s important to look at most cryptocurrencies as claims to future innovations that may or may not be proven useful or desirable.

How significant do you think it is that Morgan Stanley and Goldman Sachs will soon be allowing their clients to invest in bitcoin?

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Obviously this is a huge validation for Bitcoin as an asset and technology. I’m not sure many institutions have a strong conviction in Bitcoin yet, but the latest moves are proof that it’s now too big to ignore.

That’s one of the reasons we’re excited about launching TheStreet’s new subscription publication, Crypto Investor. We’re eager to hear how Wall Street is trading this emerging asset class and to share these findings with the many retail investors now becoming interested in the market.

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Ultimately, however, investors should keep in mind that bitcoin is seeking to build a new monetary system, one where cryptographic guarantees might even one day replace the roles of traditional banks.

Remember, the innovation with bitcoin is that individuals can take possession of a digital money for the first time. So, while you could choose to hold your bitcoin at a bank or institution, you are still able to take possession of your private keys and can store them safely on a simple hardware wallet or another type of low-cost consumer hardware.

Are NFTs a passing fad, or do you think they’re here to stay?

I understand the excitement around the NFT market. Given how hard it is to monetize creative work on the internet (and in general), it makes sense that creators would want to seize on the potential of cryptocurrency in this area.

However, I have deeper questions about NFT platforms and how they function. The 2017 crypto market boom was propelled by a similar period where many claimed that the data managed by blockchains could represent other types of value -- from social network effects to startup equity.

The legacy of these claims has not been great. Here again, the claim is that an NFT -- a unique string of cryptographic numbers on a blockchain -- can represent another item, in this case a digital file. Ultimately, however, this digital file may not be stored on the blockchain itself, but may just link to a file managed on a third-party server or platform.

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At the end of the day, a bitcoin only promises to represent a bitcoin, and your ownership of it is ensured by the collective auditing of the blockchain by a global network of computers. NFTs don’t appear to offer the same guarantees.

Do you think bitcoin will continue to be the dominant cryptocurrency, or will others eventually challenge its position?

You can definitely spend years researching and coming to various conclusions about this question. The answer for me is that I do think bitcoin will remain the dominant cryptocurrency because its developers have thought longer and harder about the system they are building and what sets it apart from traditional money systems.

I’d encourage readers to follow their own path on this question. If you’re looking to read up on bitcoin and its potential, The Bitcoin Standard by Saifedean Ammous is a great start.