Igor Danilenko, Managing Director of the large investment fund, and his report at A.Meet “Cryptocurrencies (for Dummies)” conference (09/2017). The view of a traditional investor on the cryptocurrency market.

VIDEO [Russian; Translation Support]

Coherent exposition

1. Introduction. Igor Danilenko emphasizes that he speaks as a traditional investor observing the development of blockchain technologies from the perspective of classical finance. He notes that he is not a technical blockchain expert and evaluates the space strictly within his professional domain — investment analysis.

2. Blockchain as a tool for property rights registration. He highlights that blockchain’s key advantage lies in its transparent and reliable recording of property rights. Governments increasingly explore blockchain for maintaining ownership registries. According to Danilenko, the same approach could be extended to shares and other financial instruments.

3. The economic logic of using the technology. Mr. Danilenko notes that blockchain enables fast and relatively inexpensive transactions. However, he underscores the hidden costs: infrastructure, hardware, and electricity consumption, which exceed those of traditional systems. He illustrates this by comparing 300,000 daily transactions within crypto ecosystems to Visa’s 150 million daily transactions.

4. Energy consumption as a major barrier. Igor points out that Bitcoin transactions require enormous amounts of energy. If Bitcoin were to handle transaction volumes comparable to global payment systems, it would consume nearly a third of the world’s total electricity. This makes large-scale adoption unrealistic under current technological conditions.

5. Liquidity challenges and exiting crypto positions. The speaker stresses that entering the cryptocurrency market is easy, while exiting it is much more difficult. Converting crypto assets into real-world money entails significant transaction costs and risks. This often makes cryptocurrencies unsuitable as a convenient tool for large investors.

6. Overvaluation of projects and participant incentives. He describes numerous projects that attract miners and investors despite questionable real-world utility. Many projects grow not on fundamental value but on expectations and speculative behavior.

7. The importance of team reputation. Mr. Danilenko emphasizes that the reputation of initials and project teams is critical. In the crypto space, this is even more important, as many teams lack experience or the capability to implement what they promise. Investors must critically assess the real competencies of developers.

8. Artificial constraints in cryptocurrencies. The speaker provides examples of tokens with artificial limitations, that have no real technological or economic justification. Such constraints often serve as marketing tools rather than functional features. The success of many cryptocurrencies depends less on technology and more on founders’ charisma and influence.

9. The future of blockchain and an aviation analogy. The speaker compares blockchain to commercial aviation, which initially went through cycles of boom and bust. Blockchain will require similar phases of technological refinement. Widespread adoption will be possible only when processing costs are significantly reduced.

10. Competition with traditional payment systems. Igor Danilenko argues that talk of the “death of the dollar” is greatly exaggerated. While cryptocurrencies reduce transaction costs, they do not undermine the economic resilience of fiat currencies. He also stresses the distinctive feature of Bitcoin—its lack of emission—contrasting it with traditional currencies.

11. The possibility of government intervention. He reminds the audience that governments can change the rules at any moment, including banning the ownership of cryptocurrencies. The need to buy Bitcoin before purchasing Ethereum creates additional demand for BTC, but regulatory changes could reshape this logic. As a historical parallel, he cites the U.S. ban on private gold ownership in 1933.

12. Regulatory matters. Igor Danilenko notes that Russia may eventually regulate cryptocurrencies, just as it has regulated other emerging technologies. The Central Bank currently sees no need for direct intervention, but this stance may evolve. The key bottleneck for cryptocurrencies in Russia is converting them into the real financial system, which requires user identification.https://a8life.wordpress.com/wp-admin/profile.php

13. Choosing currencies for investment. Responding to a question about the most advantageous currency, Danilenko advises investing in currencies that are currently unpopular. At present, the U.S. dollar is undervalued among Russian investors, while the euro and the ruble are in high demand. He highlights the importance of understanding market psychology.

14. The need for critical thinking. The speaker urges investors to maintain a critical view of cryptocurrency markets. He cites the example of Jamie Dimon firing a trader for investing in Bitcoin, demonstrating the traditional financial sector’s attitude toward crypto risk. He stresses the importance of fundamental analysis of the underlying technologies.

15. Conclusion. Igor Danilenko summarizes that cryptocurrencies are an interesting but high-risk domain. Investors must remain objective and evaluate both the potential and the systemic limitations of the technology.