| My interpretation is that there are multiple factors at play on the demand side: 1. Initially drug, and other illicit item dealing. It's hard to process payments for an illegal or risky business. Bitcoin (mostly) has no one to reject you as a customer. I would not be surprised if major smuggling networks were starting to use Bitcoin, as it's seemingly much easier and less risky than carrying huge wads of cash across borders. 2. Circumvention of capital controls and economic sanctions. People in Argentina, Zimbabwe, Russia, Iran, Venezuela, and China have, to varying degrees, a limited ability to process financial transactions with the outside world through the usual SWIFT/correspondent banking networks. Bitcoin solves this problem. The relatively high transaction costs are not too much of a barrier for these types of transactions, since they tend to be larger. 3. Speculation. Crypto has been shooting through the roof, and people are piling on the bandwagon. 4. Tax avoidance. Significant holders of crypto assets may want to diversify out of crypto, but can't because it will create a paper trail and trigger a form being sent to the taxman. In some cases, these people may have owed taxes in prior years which they haven't paid, and they don't know what to do. Some of them have tried to diversify their holdings by trading into altcoins or ICOs to put off the day of reckoning. IMO this factor explains a lot of the explosive demand for ICOs. 5. "Asset Protection." Crypto provides what many believe to be an off the books/untraceable store of value. This might appeal to people being sued, people going through a divorce, or people under criminal investigation. 6. Possible foreign government interests. Some countries, Russia in particular, resent the centrality of the U.S. in the world banking system, its ability to cripple economies by cutting off banking relationships, and the dollar's role in the world oil trade. These countries might be contributing to the hype, and perhaps even buying crypto to create legitimacy for alternatives to the U.S. dollar. |