Another economist weighs in on crypto, bringing all the FUD
By now you’ve seen your favourite crypto Twitter commentator give their two cents on Nouriel Roubini’s Senate testimony about cryptocurrency and blockchain which, objectively, made almost no sense.
That is, if you believe in humanity’s ability to develop technology even just a little bit. (As a fun reminder, Paul Krugman once said the internet would be akin to the fax machine in terms of economic impact, and we bet he wishes we’d all forget it --we won’t.)
Recently, Downtown Josh Brown was on Anthony Pompliano’s Off the Chain podcast and talked about financial market pundits making audacious and frequent market crash predictions. He made the point that these market predictions are made repeatedly and often, with the pundit hoping that sooner or later his prediction hits.
Roubini’s efforts feel the same; he’s been predicting the end of Bitcoin since at least 2013 and seemingly because of those lost efforts continues to double down in spite of obvious development and industry growth. Evidently, when the market continues to prove a theory wrong, some go back to review the data while others resort to brandishing nonsensical opinions before the Senate (and on Twitter).
Because it requires a perspective shift, nascent technology can be hard to grasp; what is initially created may not convey the magnitude and potential of the vision. Early iterations shouldn’t be doomed for pitfalls, especially when there is an army of people dedicated to developing solutions. This is particularly true when it comes to our ecosystem of blockchain-based assets where supporters can have serious skin in the game.
Then there have been the comments, both via his Senate testimony and Twitter that beg a question of understanding:
He has claimed that fees are ~ $60 per transaction, causing someone to pay $63 for their $3 Starbucks coffee. CoinTelegraph contributor Joseph Young then pointed out that the assumed cost per transaction is in fact not the transaction fee. Roubini deleted that initial tweet, but then reposted with the same logic here and here.
In his written testimony he made the assertion that “fiat currencies are protected from value debasement from central banks.” No, they are not. The U.S. has a long history of debasement, as pointed out here in Lou Kerner’s 10 Stupidest Things Nouriel Roubini Said In His Testimony to the US Senate Committee on Banking. Erik Voorhees, among others, also disagreed with that statement.
He went on to contradict his own argument when, after repeatedly referring to Bitcoin as a cryptocurrency scam, he claimed that Bitcoin is used by criminals and tax-evaders. To this, his counterpoint, Coin Center Director Peter Van Valkenburgh responded, “I would be interested in knowing how you can use something that isn't money to evade taxes.”
Crypto Twitter didn’t take well to these assertions, and the mud-slinging really amped up. As expected, the blocking then began - over the weekend it became the new blue check mark.
Efi Pylarinou, an independent blockchain advisor, fairly pointed out the gratuitous and immature nature of Roubini’s tweets as he spread fear, uncertainty, and doubt (FUD) around cryptocurrencies.
But Monday some were saying that Roubini sounded a “bullhorn” that may help encourage restraint on the part of “when moon” cryptocurrency investors. We’re not so sure that fear-mongering in the Senate equates to increased prudence. If anything, the remarks appear to have synced opposing sides of the industry towards a collection mission.
Maybe the real problem here is that Roubini is a conventionally trained economist; he knows nothing of sound money like the Austrian school. This objectively puts him at a disadvantage when looking at Bitcoin because it doesn’t fit into any economic framework he understands, so he just dismisses it as a scam - a theme among very traditional financiers.
The reality is that this industry brings a significant amount of real world value to our existing processes and growing pains are a sign of increased engagement. There will always be folks seeking to profit off of a new market, one should expect that. But at the end of the day, above and beyond the hysteria, we’re all here because distributed computing and economic incentive models have made it possible to transact with greater autonomy - and the ride isn’t slowing down.
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