Opinion: Chanos is wrong for trashing bitcoin

June 14, 2018
Chris Wheal

Jim Chanos and many others are naïve for trashing bitcoin and are showing their ignorance of the sector by comparing ICOs to established cryptocurrencies, says an industry expert.

Andrew Rodwin a software engineer and crypto-asset and blockchain trainer from Boston, US writes on Coindesk on Thursday that Chanos and other “venerable experts” are wrong to consider all cryptocurrencies as a scam.

Chanos is misunderstanding some important distinctions on cryptos: Shutterstock

Chanos comments

In a recent interview at the Institute for New Economic Thinking, Chanos, fund manager and investment guru at Kynikos Associates said: “The last thing I’d want to own is bitcoin if the grid goes down.”

He added: “Today we’ve got bitcoin and ICOs, which went ballistic in 2017. I suspect going forward we’re going to see more and more evidence of questionable companies as this bull market keeps advancing and aging.”

His comments reflect the scepticism of a number of high-profile crypto detractors, including Warren Buffett, Bill Gates and Robert Shiller.

Crypto naivety

Rodwin, however, believes they are misunderstanding the sector.

“At a high level, the flaw in their positions is: ‘I know finance, crypto is finance, so I know crypto.’ Treating crypto as ‘just another financial instrument is naïve’.”

Not every crypto is a currency, Rodwin states. And lumping in bitcoin with ICOs is sloppy at best, he adds.

“Bitcoin has been around since 2008. ICOs were not. The phrase ‘bitcoin and the ICOs’ is an apple-and-orange fruit salad of meaninglessness.

“Chanos is correct that some, perhaps most, ICOs are questionable. That doesn’t mean they all are.”

Many ICOs are questionable – not all are: Shutterstock

The dotcom comparison

He adds that when the internet took off, the dotcoms included Pets.com and Amazon.com. There were lots of losers and a few really big winners.

“If you wrote off the entire dotcom sector, you failed to understand what was happening. Distinctions matter. Precision matters.”

Rodwin also accuses Chanos of misunderstanding what would happen to so-called stores of value in the event of apocalypse.

Store of value hypocracy

“For rhetorical purposes, the end-times store-of-value rant is catchy, but it’s not grounded in reality. Gold is widely accepted as a store of value that is outside government control, but its use is not de-legitimised if a tiny fringe hoards it in anticipation of Armageddon.”

Another distinction Rodwin accuses Chanos of missing is that while an apocalypse may be a binary event – the economic misery produced by failed governments is not.

“The people of Venezuela are not sitting in bunkers hoarding private keys, but they are using crypto assets to work around real, in-your-face, economic woes brought on by an inept government that badly mismanaged its economy and its fiat currency.”

While Chanos may be right about many things, Rodwin says that when it comes to crpytos, “despite trying to sound smart, he’s willfully ignorant and lacking in humility.”

Post written by Chris Wheal
Chris Wheal is editor of OpenLedger's news and features service. An award-wining business journalists himself, he runs a team of freelance journalists from across the UK and north America.

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