Aaron Brown, Columnist

When Picking Cryptocurrency Winners, Don't Think Long Term

Will governments smash digital currencies, or will digital currencies smash government monopolies on money? Neither extreme is likely.

January 16, 2018 at 7:00 AM UTC

By Aaron Brown

Aaron Brown is a former head of financial market research at AQR Capital Management. He is also an active crypto investor, and has venture capital investments and advisory ties with crypto firms. He is the author of the soon-to-be-released "Wrong Number."

Cryptocurrencies are not going anywhere.
Photograph: Bloomberg

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JPMorgan Chase Chief Executive Officer Jamie Dimon retreated last week from his contention that bitcoin is a fraud. Still, he told the Fox Business network that “Bitcoin to me was always what the governments are going to feel about bitcoin as it gets really big.”1515762747306 Will governments smash cryptocurrencies, or will cryptocurrencies smash government monopolies on money? Neither extreme is likely. Thinking about intermediate outcomes helps choose which cryptocurrencies to back today.

The last major money innovation was paper money.1515762782755 Paper is cheaper to produce, transport and store than precious metals, and can incorporate security features1515762815801 and contractual terms.1515762866207 Crucially, paper could sidestep usury prohibitions and cross-border restrictions. Initially, paper was a payment mechanism for gold-settled transactions. Over time the link to gold became more theoretical, often severed in stress times. In 1971, it was cut for good. Money was paper and gold was just another commodity.