I am doing this on the assumption that cyrpto is going to be the main financial instrument for the world by the middle of this century. The only way I plan to exit this strategy is if it becomes crystal clear that this assumption has failed.
I've recently been struck by analogies between the development of blockchain technology and the development of the internet, in the sense that both had / have tremendous potential to transform business (and our lives) in ways that are hard to imagine in advance. Even if I buy that argument for blockchain (which I think I do), that still doesn't give me any confidence that any of the current coins or platforms are necessarily the way forward. Lots of people went broke in the dot com bubble, even though they were absolutely right in betting that the internet would change the world.
I hear a lot of talk about how we don't yet know how or if we will use specific cryptocurrencies in the future, and there may be a fair argument that we should own a few wild speculations or hedges to cover us in the event of unexpected technological change. In the domain of cryptocurrencies, if they become "the main financial instrument for the world by the middle of this century" our portfolios would experience the following consequences:
*Much of the banking sector would be destroyed, and replaced by crypto finance startups that would be un-investable for years after they've wiped out the companies we were invested in.
*If the dominant cryptocurrency had deflationary characteristics, like bitcoin, the world would sink into an economic depression. Deflation is really bad for economic growth.
*If central banks could no longer control the money supply, severe recessions and inflationary/deflationary episodes would rock economies, as occurred in the late 1800s.
*A huge transfer of wealth would have to occur from people using national currencies to people holding and not spending fiat cryptocurrencies. This would be the biggest transfer since the Russian or Chinese Revolutions and nobody would take it sitting down. First, established interests would try to ban crypto. If that failed, war would be the result. I.e. few people would accept lifelong serfdom by shrugging their shoulders and saying "wish I bought Bitcoin when it was only $100,000."
*Wars might also be fought over cryptocurrency specific issues, like forks or other changes in the rules. A deflationary crypto would eventually have to change its rules to be inflationary if the economy is to grow, but existing wealthy people would be against such changes (as they are generally against QE now).
*An energy crisis and chronic microprocessor shortages would crimp economic growth and drive inflation. Things like air conditioning and electronics not dedicated to payment processing would become much more expensive, if not luxuries.
*A worst-case climate scenario would occur, as a mad dash for fossil fuels occurs in an attempt to keep up with growth in the use of crypto. Coastal cities worldwide face the fate Jakarta is facing now, and desertification occurs worldwide. Places like Arizona and Pakistan become as uninhabitable as the Sahara Desert around mid-century.
*Hackers become a secret nobility, wiping out entire national reserves of cryptocurrency and millions of investors at a time, and influencing politicians and law enforcement to look the other way. Again, wars ensue.
*Authoritarian nations that are able to ban crypto (e.g. China) will outperform nations where domestic interest groups prevent legislative action. Big cryptocurrency holders in democracies will soon lobby to prevent any legislation from limiting use of crypto. Energy companies may help them. Thus, the influence of authoritarianism expands.
Overall, it's a bleak picture for those of us retiring on the proceeds of investments and expecting to live in free, wealthy societies like we did in the past. I have no idea how to hedge for such a future, much less exploit it.
Picking which cryptocurrency will attain dominance 20 years from now is at least as hard as picking stocks. Bitcoin, Ethereum, Litecoin, Dogecoin, etc. could ALL easily fade into obsolescence just like hundreds of once-massive technology brands such as DEC, IBM, GE, Atari, Netscape, MySpace, Blackberry, Nokia, etc. In a future where one or maybe two cryptocurrencies become dominant, and hundreds (thousands?) of others fail, a diversification strategy may not be helpful. You'd actually have to pick the winner and have so much invested in it that you wouldn't get to pick very many others. This is a decidedly narrower path for retirement success than the old indexing and diversification advice. Even worse, there's no particular difference or reason why one cryptocurrency is more likely to succeed than another. It's literally a wild guess among hundreds of current and future contenders, and there is no way to be good at it or apply reason to it. Perhaps the winning strategy would be to place some kind of long-term bet against cryptocurrencies in the hope that the eventually successful currency hasn't been invented yet. Still, that's crazy risky.
Quite frankly, if we even started going down the road described above, there would be considerable backlash and probably some kind of reversal before it got too far. It's entirely possible though, that this backlash is misdirected. E.g. people might attribute their economic decline to the usual suspects: minorities, other countries, conspiracy theories, religious causes, political opponents, etc. rather than blaming the new currency. If crypto investors emerge as a political force, they could reshape politics by cultivating a blame game while they consolidate wealth.
Good luck hedging all of that! I figure I might as well bet everything that the whole cryptocurrency thing collapses or is banished by governments. That's probably the only direction which could lead to a prosperous and happy retirement. Given that a lot of other people have this interest, it's likely this side will gain support in the coming years.