2023-06-30 06:18:10
While proponents of cryptocurrencies say the sector is growing and poised to become part of our daily lives—as evidenced by recent interest from traditional financial institutions—not everyone shares that view. The latter also includes the author of Black Swan, Nassim Nicholas Taleb. In an interview with CNBC on June 22, Taleb slammed cryptocurrencies, including Bitcoin (BTC), because he says they have flaws that suggest the industry is nothing more than a “sect.” According to Taleb, due to its unique characteristics, Bitcoin is actually a fusion of a financial instrument and a sect, which is unprecedented in the history of the financial world. He also expressed skepticism about whether the digital currency could be used as a practical transaction and inflation hedge. “It did the exact opposite of its inflation hedging mission by collapsing. (…) This is roughly the first time in world history that a financial instrument is associated with a cult,” he said. Bitcoin’s past doesn’t matter The author emphasizes that we should not only focus on the past performance of an asset, but also assess its potential draws and risks. Let’s remember that Taleb, who was disappointed with the Federal Reserve’s policy, initially spoke positively about Bitcoin. Now he has admitted that cryptocurrencies can be used for small transactions, and because of the alleged traceability of blockchain technology, he does not think cryptocurrencies are an effective tool for money laundering. In fact, one of his criticisms of the industry was its ability to facilitate low-stakes money laundering. “The thing is, it can be good for transactions, small transactions or small amounts of money, but not for real money laundering, because of its high traceability,” he added. The concentrated power of the crypto market At the same time, Taleb expressed his concern about the concentration of power distributed among the main players of the crypto market, which is quite noticeable, if we compare it with the transparency and influence that can be exercised over the Federal Reserve. He described the impact of cryptocurrencies as confusing and raised concerns about their long-term effects. As the tug-of-war surrounding cryptocurrencies continues, Taleb’s critical assessment highlights the ongoing problems with Bitcoin, which he describes as a cult. Among other things, he disputes its practical utility, stability and concentration of power within the crypto-ecosystem. This is not the first time the author has sounded the alarm about the viability of Bitcoin as a financial instrument, claiming that it has a detrimental effect on the economy. What’s more, he recently called cryptocurrency a “tumor” harmful to the economy.
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