In my opinion, the report shows a lack of understanding of the fundamentals and inner-working of both bitcoin and other digital currencies. It is hard for me to take a report so seriously when the author shows incompetency in the underlined topic.
The report main argument against crypto-currencies is: "But they are not real!" repeated multiple times through the report.
Well, define "real". What does it mean to be real? Is the dollar real because you can hold a 1 dollar bill in your hand? If so, is the value of the dollar equal to value of paper; or the amount written on it?
The author main argument is very weak; and in my opinion shows a lack of understanding of how markets work.
In the very long run, everyone will die, the Sun will run out of fuel, and the universe might crunch. We could also be in a simulation.
What matters is the normal distribution of volatility of such assets; for day to day usage. And their trend, for longer term investment. People assume the US dollar is a stable currency because we have yet to experience a black swan event that disrupt that.
Edit: And if the Ponzi-like scheme is what the problem is, why isn't then the community solving for that? The easy answer is that then adoption is difficult, because if you have a Ponzi-like scheme it is much easier to attract VC money, likely the money of bad actors more easily, etc. Yes, that hyper-incentive of the Ponzi-like scheme does get people working together, more quickly, whereas having a normal or no incentive (the incentive being the value of a public ledger) then it will grow at an intrinsic pace.
I don't think bitcoin fits that definition.
Paper money initially was -- like cryptocurrencies are today -- inefficient, had interop problems and highly volatile. The main difference is the rate of experimentation/iteration today is so much faster and we have a complex understanding of economics already which we can use as a guide. Also, back then some of the experimentation was being run at national economy scales. Cryptocurrencies are great in that we can experiment with the idea without reaching/requiring a potentially economy-collapsing scale during the early iterations.
I doubt I'll live to see the if they turn out to be the "next version" vs an interesting experiment -- I can't imagine a wholly new definition of what is money taking root in under 2 generation.
I can't speak for what he means but my interpretation of what real means to him is this - When you buy a stock for a software company you believe in the software, the target segment they are targeting and maybe yourself a customer. So two things define the real-ness of the business - working software and a dedicated user base.
Let's look at crypto currencies from the same lens. Sure the software is great and holds potential for the future. And sure one might say output is as good as the dollar. But, currently there is no sustainable market. There is no urgent need for people to acquire bitcoin other than say speculation purposes.
One might argue they will catch on in the Average Joe with time. But the biggest hurdle is Average Joe likes to see and feel the money. How will one explain them what really a bitcoin is without getting too technical? The problem here is one from the Silicon Valley show. Richard builds a better platform for data management. It doesn't sell because it doesn't make sense to average people at all. So better product doesn't equal to superior returns. It just means superior product.
So the biggest problem in front of bitcoin or other crypto currencies is to take it mainstream.
And certainly fights like the BTC Cash vs Bitcoin Core doesn't help. I mean sure many people weren't happy with the unlimited printing of dollars by Feds in 2008 but at least it dint threaten to break down the economy completely because one side dint want to give in to the other and float their own currency. Stability is important and unfortunately crypto currencies are not there yet.
Beyond the weak backup of his main arguments, I felt the most striking issue was his contrast between cryptocurrency and gold:
What will happen to Bitcoin's price and liquidity in a crisis if people decide they'd rather hold dollars (or gold)?
Gold and dollars are not immune to the concerns he raises about liquidity and price. When you're starving, a bar of gold doesn't help very much.
I think his arguments about a bubble in cryptocurrency have some validity, but not without caveat and nuance - they are more of truisms as written. Of course emerging asset classes and technologies will overshoot. But that doesn't take away from the fundamental realization that, at least for now, cryptocurrencies provide value to those who use them. This might be for money laundering/black market activity as people below have pointed out, but its still valuable for them. The value might also be for easy cross-border money transfer and risk mitigation when dealing with government manipulation of currencies (see Venezuela and Argentina.)
Either way, I'm not sure cryptocurrency is really that useful of a place for a firm like Oaktree to be investing in, because they are credit guys, not macro guys. That said, former credit guy Mike Novogratz invested heavily in cryptocurrency and seems to have done well thus far: https://www.coindesk.com/hedge-fund-founder-invests-10-net-w...
Strictly speaking nothing has "intrinsic" value, but Bitcoin can be valued because it has many qualities of "good" money like being transportable and durable, doing some of them theorically better than current monies.