Why crypto disruption is a meme, not a certainty

Alex Pickard, Vice President, Research at Research Affiliates this week released  a piece titled “Cryptocurrencies: The Power of Memes” looking at the claim that blockchain technology offers a disruptive, decentralized solution to problems with centralized, traditional finance.

Is there merit to such a claim? Pickard argues that the idea of cryptocurrencies’ disrupting the juggernaut of traditional finance is a meme, not a certainty. We have all seen popular visual memes, pictures with white text over them shared on social media.

He uses meme to refer to a statement of belief that spreads through a community or society, such as “Bitcoin is the future” and “Crypto will disrupt traditional finance.” These memes, along with countless others, function as word-of-mouth marketing to entice speculative cryptocurrency investment.

For these innovative crypto markets to transition away from speculation and memes and actually disrupt the traditional financial industry, they will need to overcome three problems. He writes:

• First, the profitability problem: disruption would be paradoxically unprofitable for cryptocurrency holders because speculation, the primary modality by which cryptocurrency investors profit, would decline.
• Second, the power problem: traditional financial institutions are powerful and heavily entrenched within business and politics; disrupting such an established industry is an arduous goal.
• ​​​​​​​Third, the crypto-community problem: the crypto community has transitioned from a grassroots community focused on disruptive utilization of blockchain to a speculation-centric community that encourages the belief in and evangelization of memes. I elaborate on these problems and explain why they lead to a solution in which disruption is an event lodged permanently on the horizon.

Key Points

• The idea that cryptocurrencies will disrupt traditional finance is a meme, not a certainty.
• Cryptocurrencies are innovative, but to be disruptive they will need to overcome several difficult hurdles.
• Rather than overcome these hurdles, cryptocurrency has morphed into a permanently speculative investment vehicle, for which disruption lives forever in the future.