Is Bitcoin or Gold the Better Investment? Opinions vary widely, with billionaire cryptocurrency fan Mark Cuban favoring Bitcoin — and beating gold — and Euro Pacific Capital CEO Peter Schiff going the other way.
Nassim Nicholas Taleb also has some ideas. This week the author of the 2010 book New York Times best sellers the black swan—among the few who predicted the 2007-2008 financial crisis—have weighed heavily in the debate interview with the french weekly L’Express.
It’s safe to say that Bitcoin, which has dropped over 60% since the start of 2022, doesn’t impress him.
“Technology comes and goes”
One problem with Bitcoin, he said, is that “we are not sure about the interests, mindsets and preferences of future generations. Technology comes and goes; gold remains, at least physically. Once neglected for a brief period, Bitcoin would necessarily collapse.”
Furthermore, he said, “an entry in a ledger that requires active maintenance by interested and motivated people – that’s how Bitcoin works – cannot be expected to retain its physical properties, a condition for monetary value, for any length of time. . .”
Asked about the origins of the “cryptocurrency craze”, he pointed to the low interest rates of the last 15 years.
“Reducing rates creates asset bubbles without necessarily helping the economy,” he said. “Capital no longer costs anything; the risk-free investment returns become very low, even negative, leading people to speculation. We have lost track of what a long-term investment is. It’s the end of royal finance.”
One of the results, he argued, was “malignant tumors like Bitcoin”.
The “everything bubble”
Taleb is not alone in observing the effects of what has been dubbed the “everything bubble” – created by years of loose monetary policy by the Fed and other central banks after the Great Financial Crisis. As Fortune reported this week, the era of easy money was full of bulls — from cryptocurrency experts to hedge fund managers, economists and investment bankers — who believed the good times would never end.
Interestingly, Taleb supported Bitcoin from the beginning. At the time, as he explained L’Expresshe criticized then-Fed Chairman Ben Bernanke.
Bernanke, he said, did not see the system’s structural risks before the 2008 crisis and overdid it afterwards: “Instead of fixing the debt and mitigating hidden risks, he covered them with a monetary policy that was supposed to be only transitory. I mistakenly thought that Bitcoin would be a bulwark against the distortions of this monetary policy.”
“Manipulators and Scammers”
Taleb also warned that “the crypto universe attracts manipulators and scammers”.
He’s certainly not alone there.
Coinbase CEO Brian Armstrong said at the a16z crypto Founder Summit in late November: “We have to come to terms as an industry with the fact that, I think our industry is attracting a disproportionate share of fraudsters and scammers. And that’s really unfortunate. That doesn’t mean it’s representative of the entire industry.”
(Armstrong added that it was “baffling” to him why FTX founder Sam Bankman-Fried still wasn’t in custody — a few weeks later, he was.)
taleb tweeted this week, he was trolled and vilified for his crypto criticisms, but those attacks were made up for by the “lots of thank you messages for saving young people from Bitcoin.”
He shared a message in which a Twitter user said he almost bought Bitcoin but proceeded to follow Taleb’s thinking on it, writing: “I understand why crypto sucks in theory. Then it failed in practice. NNT saved my dad’s hard earned money.”
Meanwhile, many Bitcoin bulls remain bullish. ARK Invest CEO Cathie Wood recently reiterated her prediction that Bitcoin will reach $1 million by 2030 — it is now just under $17,000. She also argued that Bankman-Fried disliked “transparent and decentralized” Bitcoin “because he couldn’t control it”, saying the FTX fiasco was caused by “opaque centralized players”.
As for the Cuban, he said on the Bill Maher show random club podcast last month: “I want Bitcoin to drop a lot more so I can buy a little more.”
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