Nassim Taleb calls Bitcoin a “tumor” attributable to low interest rates

Author and risk analyst Nassim Nicholas Taleb targeted cryptocurrency in a recent TV interview, arguing that the continued relevance of Bitcoin and other blockchain assets was a monetary policy accident that caused many assets to be overvalued.

Speaking at CNBC’s Squawk Box, the famous probability philosopher reiterated his belief that Bitcoin should be valued at zero in ruthless language, arguing that the continued value of cryptocurrency is a “tumor” driven by overly expansive monetary policy. .

“Bitcoin is still in use. It’s still at 20,000; it’s not a, you know, a thousand or zero. So we still have things that need to be corrected. ”

Asked if Bitcoin was a “signal,” Taleb retorted in perhaps his sourest remarks on cryptocurrency to date.

“I call it tumor. There is something that has produced this tumor … the real estate sector is another tumor. ”

The Arabic-speaking statistician attributed the “tumor” in large part to the policies of the Federal Reserve, which he says created an economy in which many assets are vastly overvalued relative to their ability to provide long-term profits.

“I think we had 15, 14 and a half years of Disneyland that pretty much destroyed it [the] economic structure. Think about it, no interest rates, “Taleb said in an interview with Squawk Box.

“The Fed overcame by lowering the interest rate [sic] too much. The first hundred basis points work, the second a lot less; at zero interest rates now, obviously, for a long period of time, you are damaging the economy, creating bubbles, creating tumors like Bitcoin. ”

While Taleb has been unequivocal in his cryptocurrency assessment, he hasn’t always been so critical of blockchain assets. In 2020 Taleb expressed support for cryptocurrencies, advising the people of his native Lebanon to “[u]if cryptocurrencies! ” as a means of circumventing the Lebanese government’s restrictions on paying remittances to the country in foreign currency.

The germ of Taleb’s current opposition to cryptocurrency can be traced to a dispute with Coinbase’s customer support in June 2020, which culminated in the closure of his Coinbase account by the investor. In the following February, Taleb claimed to have sold all of its cryptocurrency assets, calling Bitcoin a “failure” because it was too volatile to function as a usable currency.

At first glance, cryptocurrency would seem incongruous with one of Taleb’s favorite concepts, the so-called “Lindy effect”, which the Arab expert has popularized and enriched with mathematical rigor. The Lindy effect establishes that you are more likely to encounter a non-perishable entity or institution in the middle of its life than at the beginning or end, and therefore that those things that have persisted for a long time are likely to persist into the future for the same amount of time. This principle may explain some degree of heuristic bias towards cryptocurrencies, none of which can boast a longer lifespan than that of a typical high school student.

Therefore, perhaps unsurprisingly Taleb has turned to a broad skepticism towards cryptocurrency, which he now claims has an expected value of “no more than zero”. Last year, the author of Black Swan published the paper “Bitcoin, Currencies, and Fragility”, in which he argues that cryptocurrency technology fails to address the problems he claims to solve.

Curtis Yarvin, founder of the decentralized internet platform Urbit, agrees that monetary policy could be responsible for the wild fluctuations in the price of cryptocurrencies, although he expresses greater agnosticism about the possibility that Bitcoin’s value could drop to zero.

“I agree that loose money makes Bitcoin possible,” Yarvin told The Epoch Times.

“Loose money means ever-increasing debt, which covers structural losses in a structurally unhealthy economy.”

Yarvin, who is perhaps best known for his monarchical political writings and frequent podcast appearances, has maintained a long-standing interest in monetary policy and has similarly been critical of the Federal Reserve’s precedent of rate policy. zero, from which the central bank has only recently begun to retreat in the face of rising inflation.

However, unlike Taleb, Yarvin is more optimistic about the longevity and potential benefits of cryptocurrency, which he believes could become more valuable in the long run as loose money becomes inevitable for central banks, creating demand for less easily manipulated stores of value. .

“I think cancer has a future because I don’t see any way for this economic system to escape loose money,” Yarvin added.

Yarvin stressed the propensity of cryptocurrency winters to discourage casual and reckless investors, causing panic in sales among those he believes aren’t really saving in cryptocurrency.

“In periodic contractions, the tide goes out and we see who swims naked. Everyone is swimming naked, they have no choice. But these contractions cannot be sustained, because they are too painful. This is why buying in a shrinking winter is often a good idea. ”

An inquiry by The Epoch Times into the Talib’s remarks was relayed to the Lebanese intellectual by his partner Paul Skallas. Taleb, whose criticisms of reporters are well documented, responded by posting on Twitter a screenshot of the request and the link to the bitcoin black paper. Despite the subtle jibe, Taleb did not respond directly to a request for comment.

To follow

Nicholas Dolinger is a business reporter for The Epoch Times.


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