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Why BlackRock Is Correct In Predicting Complete Losses For (Most) Crypto Investors

Mar. 05, 2018 7:57 AM ETGBTC, COIN-OLD, BTC-USD5 Comments
Rian Insights profile picture
Rian Insights


  • BlackRock's assessment on cryptos was misconstrued and misunderstood.
  • The data and arguments presented in the report points toward a cautious approach towards investing in cryptocurrencies, rather than being dismissive of them.
  • The cryptocurrency market is still in its infancy and will take a lot of time to mature. During that period, there will be a lot of crash and burns.
  • A regulatory framework is necessary for the survival of the cryptocurrency ecosystem.

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On February 26 BlackRock (NYSE:BLK) published its Global Weekly Commentary in which its global chief investment strategist, Richard Turnill, shared his views on cryptocurrencies and came to the conclusion:

We see cryptocurrencies potentially becoming more widely used in the future as the markets mature. Yet for now we believe they should only be considered by those who can stomach potentially complete losses. Similarly, blockchain needs to overcome significant hurdles to reach its promising future.

Ever since this commentary was published and picked up by media outlets, it has generated the usual fierce debate between critics and believers of cryptocurrencies. While crypto-related websites and bloggers only took the positive from Mr. Turnill's statements ('We see cryptocurrencies potentially becoming more widely used in the future as the markets mature'), the critics latched on to the latter part. However, there is more to it than meets the eye. No one paid attention to what exactly Mr. Turnill said and in what context. The critics and the believers just took home the side of story that suited them, without digging deep into Mr. Turnill's assessment and the implication of investing in cryptocurrencies at this stage that he was referring to. In this post, I will like to do the opposite of that.

Before beginning, I would also like to disclose that I am not advocating for or against bitcoins (or any other cryptocurrency).

The Size and Nature of the Market

In the weekly commentary, Mr. Turnill presented some key data points and facts of the cryptocurrency market, which I

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Often fooled by randomness, yet driven by curiosity, trying to find needles in a haystack.My investment philosophy can best be summarized by this quote from James 'Jim' Grant, founder of Grant's Interest Rate Observer:"To suppose that the value of a common stock is determined purely by a corporation's earnings discounted by the relevant interest rate and adjusted for the marginal tax rate is to forget that people have burned witches, gone to war on a whim, risen to the defense of Joseph Stalin, and believed Orson Welles when he told them over the radio that the Martians had landed."  I post my analysis here on Seeking Alpha primarily to keep a journal that records my thoughts about a company (industry) as I am learning about it, and secondarily to avoid hindsight bias in the future. Writing helps me to deepen my understanding of companies and industries. It also helps me to process my thoughts and keep a track of the industry (or stock) I might find worthy of investment. I am not on Seeking Alpha to sell or promote any stock, product or service. Any article or blog post I publish is not an investment recommendation and should not be relied upon when making investment decisions - investors should conduct their own research.

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