It is often a human default to discount criticism of something we strongly believe in as ignorance, hatred, or stupidity. However, I would push back and say listening to critics, especially regarding something new that has yet to have its kinks worked out and be fully established, in this case, crypto, can be one of the best things we can do. Although much of the time we just disagree with critics, often they bring up good points, misconceptions, and holes in an argument that need to be explained, thought through or fixed.
Recently the CEO of JP Morgan Chase, Jamie Dimon, spoke on his thoughts regarding cryptocurrency, and these are the three main points he brought up, along with our thoughts.
1. A seemingly valid point that Dimon makes is that a currency is backed by a central bank and has been declared legal tender by a government, this is a misconception. What actually constitutes a currency is just a recognized exchange of value, what he is describing is fiat currency. That being said, this raises a solid question of whether or not some cryptocurrencies should even be thought of or referred to as currency.
In a CNBC interview last week, Canadian investor and shark tank star Kevin O’Leary – commonly known as Mr. Wonderful – brought up a very good point stating that he thinks of cryptocurrencies more so as a means of investing in software, or the underlying infrastructure of the blockchain networks and protocols that these cryptocurrencies use.
2. Another One of Dimon’s arguments is that it has no intrinsic value, and although technically nothing has intrinsic value, you could make an argument that in fact owning Ethereum for example is more valuable than just hoping the price will go up. This is because you can actually stake some cryptocurrencies, for example, polygon, and generate cash flow at a much higher APY (annual percentage yield) than what you would get from putting your money in a savings or money market account.
3. Lastly, Dimon pointed out that crypto is still used more so as an exchange for cash than for goods and services which is also a fair point, if crypto is really going to thrive in the future it needs to become widely used as an actual exchange of value and not just a means of storing value or ‘getting rich.