DAA Manager Insights: Global Crypto One
DAA manager Dr. Achim Illner of Global Crypto One (GCO) believes Bitcoin as a store of value is the most important business case in the entire crypto-economy. Learn more about his views about Bitcoin, the crypto ecosystem in Germany, and more in this week's interview.
We are seeing more and more activity in the German crypto ecosystem. What is one aspect you find interesting?
Germany itself is quite decentralized, with different approaches to crypto in major hubs like Berlin (VC and developers), Frankfurt (fintech), and the Ruhr area (cypherunderground).
Nevertheless, German contributions to the crypto ecosystem have always been strong because of German developers (IOTA, Lisk, etc.). Developers (and not marketers) delivering products is what is most needed in the current stage of the overall market.
To summarize: there is an active, growing crypto scene in Germany, despite the relatively negative perception in media/politics/regulation.
In your DAA description, you talk about the blockchain ecosystem as currently being in the venture capital stage. How long will this stage last? Do you think investment approaches will change over time? Why?
No doubt we are in the early days of crypto. Mass adoption and business models are missing, and there is a lot of noise, scams, and irrational projects. This stage will probably end when projects both big and small deliver their products and fight for measureable live adoption metrics. There is a tremendous analogy to the internet “new economy” euphoria, when the business concepts of most companies in the German stock segment “Neuer Markt” in 2000 were fine, for example, but there were no users and no feasible digital infrastructure, so basically 90% of companies failed quite dramatically. Looking back, many of the ideas of the so-called “internet bubble” are now live and objectively changing the world.
The crypto journey might look similar. Personally, I think 2–4 years are needed for mass adoption. As an investor, you have a chance to be ahead of the herd, but everyone should be ready to survive cold market phases and to take financial risks. Regarding institutional finance, I think five years from now crypto will replace gold in normal mixed public retail investment funds.
Your view on Bitcoin is that it is a store of value. Please explain this view.
The store of value (SoV) case for crypto is by far the most important legitimate business case available in the entire crypto ecosystem, but it is largely misunderstood. Storing personal value is a very basic need of mankind, becoming necessary shortly after food and shelter are secured.
The favorite for being the leading (SoV) coin (this is a winner-take-all area, so there cannot be many) is Bitcoin, given its large, truly decentralized network, strong security, and history of being 100% functional and reliable, plus the multiple massive attacks BTC has already survived over the past nine years. The more attacks BTC survives, the more trust it can claim.
In a digital world, gold is quite a “stupid” SoV. When it comes to SoV, BTC is superior to gold in every meaningful category except history and reputation. Traditional fiat money like the dollar and the euro cannot be seen as good SoVs (anymore) because the goals of central bank policies have been changed primarily to state deficit funding and serving special interest groups like banks. To put it more concretely: entrepreneur and investor John Pfeffer calculates, based on what I see as realistic assumptions, that if this extremely important case for Bitcoin as an SoV becomes reality over time, the BTC price could reach $800,000. No other coin can ever have as much impact on the world if BTC becomes the global SoV. At the current stage, it is also very difficult to find intellectually sound arguments against the BTC as an SoV case, as pointed out in Saifedean Ammous’s new book The Bitcoin Standard, so it should come as no surprise that I am personally very bullish on BTC in the long run.
Coming from a traditional finance background, how do you see mass adoption of crypto from an investment point of view? After initial denial, do you find that more and more investors are willing to discuss it? Do they understand the industry?
At first glance, the history, language, culture, and some of the goals of this new sector coming from the underground stand in complete opposition to easy adoption by the financial establishment. Effort and time are needed to bring institutional money on board by explaining the benefits, and this is more difficult than people know. I also have to admit that this is true for Europe, which in general is more conservative. However, we can be optimistic: fundamentally better concepts, ideas, and products always succeed. Projects like BTC and ETH are already too big to ignore. The financial industry will enter the space, as is already happening in the US, with their ambition to be the leader in all important economic categories.
Another big problem for financial industry adoption is age: the generation of Warren Buffett and others will most likely never dive seriously into this topic. Based on multiple interviews, my analysis is that the older generation doesn’t understand the new concept of “human-free” trust — that, for example, a large Bitcoin network based on math, software, and a consensus mechanism better serves the user than a group of central bankers deciding what will happen next. The reason is that they don’t trust the network, thinking someone is sitting somewhere in the dark with the power to manipulate the system — because that’s their perception of the world.
In my eyes, crypto will take over, at the latest, when power is handed over to the generation of digital natives.
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