This is New York University economist Nouriel Roubini in an interview with Goldman Sachs Group Inc.’s Top of Mind publication, pushing back against the idea that bitcoin and other cryptos are an alternative to d other instruments such as inflation hedges. In fact, Roubini argued that cryptos are not some kind of currency or asset at all.
In an issue, published Friday evening, Roubini, long skeptical of digital instruments, was unequivocal.
Often described as “Dr. Doom” for his warnings before the 2008 financial crisis, he dismissed the idea that cryptos represent a new form of currency, arguing that they do not meet four criteria: serving as a unit of currency. account, means of payment, a stable store of value, and serving as a single currency, or benchmark for comparing the value of similar financial instruments. He repeated his joke that “Even the Flintstones had a more sophisticated system using seashells as a single currency to compare the price of different products. “
And according to Roubini, cryptos do not correspond to any kind of asset:
Assets have cash flow or utility that can be used to determine their fundamental value. A stock provides dividends which can be discounted to arrive at a valuation. Bonds provide a coupon, loans provide interest, and real estate provides rental or housing services. Raw materials like petroleum and copper can be used directly in different ways. And gold is used in industry, jewelry, and has always been a stable store of value against a variety of extreme risks, including inflation, currency depreciation, financial crisis, and political and geopolitical risks. Bitcoin and other cryptocurrencies have no income or utility, so there is no way to come up with a fundamental value.
For Roubini, the sharp rise in the price of cryptos in recent years has the characteristics of a stock market bubble.
“A bubble occurs when the price of something is well above its fundamental value. But we can’t even determine the fundamental value of these cryptocurrencies, and yet their prices have increased dramatically. In that sense, it looks like a bubble to me, ”he said.
The volatility of the crypto market was clearly manifested this weekend, with bitcoin 50% drop from its all-time high above $ 60,000 set earlier this year. In fact, the fall of bitcoin and the carnage of other digital instruments have been accused of adding to the volatility in financial markets, including stocks.
Bitcoin has increased by around 11% in the past 24 hours. Stocks were also on the rise, with the Dow Jones Industrial Average up just under 200 points, or 0.6%, while the S&P 500 rose 1.1% and the Nasdaq Composite rose 1.5%.
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Roubini was decidedly in the minority among respondents presented by Goldman Sachs, which included leading crypto investors Michael Novogratz, CEO of Galaxy Digital Holdings and Michael Sonnenshein, CEO of Grayscale Investments, the world’s largest digital asset manager.