Like any other financial industry, the crypto trade has received a lot of love and criticism in equal measure.
It is, however, an undeniable fact that the institution of virtual money has suffered widespread disapproval by banks and governments.
Such claims go a long way in influencing public opinion and have a direct effect on the trend of crypto prices.
Prominent experts and investors have branded Bitcoin, and other virtual coins, as a bubble that is bound to pass; it is like a moving storm.
In this regard, they have sent stern warnings to enthusiasts about their temptation to join the so-called ill-fated “cryptocurrency bandwagon.” This move stems from the tendency of Bitcoin prices to continually plummet to the detriment of investor interests. Well, they seem to have a point.
Bitcoin prices have taken a hit in the past few months. The beginning of 2018 has seen the virtual coin trade at well below $8,000 US Dollars. This is a massive disparity when compared to the eye-watering prices that Bitcoin offered in yesteryears.
The phenomenon has attracted the interest of financial analysts who have sought to mystify the intrigues surrounding the monetary integrity of cryptocurrencies.
One such analyst is The Street London Bureau Chief Martin Baccardax, who has issued warning statements concerning the tragedies borne in cryptocurrencies’ price woes. In his view, he has stated that the crypto trade’s volatility, which was a definite trait, has begotten problems that could hurt ambitious investors.
A high potential for financial losses becomes imminent when the stakes go higher and higher by each transaction.
Baccardax validates his concerns by citing the example of the advent of the internet way back in the 90s. While the internet took a long time to be universally accepted, the World Wide Web was just a singular product.
This means that the ideas used in the creation of the internet would gain momentum by each passing day because of the simplicity in its very fiber and ease of understanding that is accorded to the internet’s target market.
The crypto trade is thus very different from any other inceptive concept. Admittedly, the existence of more than 10,000 virtual coins begets more harm than good. Why can’t there be a single token that acts as the standard of exchange?
The invention of Bitcoin was later followed by the creation of thousands of other forms of cryptocurrencies. This stems for the fact that creators sought to correct the shortcomings suffered by Bitcoin. In Baccardax’s view, these inventions have done little to adorn the reputation of virtual money; they essentially do nothing.
He made these comments on an episode of Al Jazeera Inside Story, in which he would strongly affirm to the premise that cryptocurrencies have failed to be unique in providing solutions to human problems.
Regarding this, the available payment systems seem to work well without the crypto intervention. These systems have been found to be very efficient and cost-effective. Furthermore, the energy used in Bitcoin mining is monumental but is not required in the conventional financial industry.
The problem of double-spending has also been tied to the underlying issues of using Bitcoin and other virtual currencies. Some experts believe that there is no concrete justification for the mass adoption of cryptocurrencies across the financial divide.
Additional financial experts have faulted Bitcoin for its overreliance on speculation to stabilize market prices. Most investors would rather invest their resources in functionally traditional payment systems rather than gamble with over 10,000 intangible coins that are created in cyberspace.
But What Does Wall Street Say?
Is Bitcoin a passing cloud? Or will the Bitcoin bubble guarantee investors a bright future?
Prominent financial pundits, economists, business leaders and investors have opined on the subject of Bitcoin’s integrity.
The past few years have seen the publishing of numerous op-ed pieces and periodicals meant to debunk the myths associated with trading in Bitcoin and other cryptocurrencies.
Nevertheless, views seem to vary across the social domain with some experts strongly discouraging people against investing in Bitcoin while others have a slight soft spot for the crypto trade. This aspect is true even in the face of diversity as far as the cryptocurrency portfolio is concerned.
Now, let’s have a look at what notable financial moguls said about Bitcoin:
Warren Buffet, a billionaire businessman and one of the most successful entrepreneurs on the global scale, once referred to Bitcoin as a “bubble” during an episode of his regular Q&A media sessions that he hosts annually.
He spoke about the speculative nature of crypto markets by citing the usual investor excitement that is created by Bitcoin price movements. In his view, Bitcoin cannot be appraised because it is not a “value-producing” asset.
Peter Schiff, the president of Euro Pacific Capital, is another expert that has been quoted on the Bitcoin quagmire. He is an experienced individual and is credited with being the predictor of the 2008 real estate bubble experienced in the United States. He is known to be an astute business leader with a sweet tooth for the big bucks. This passion, however, does not extend to Bitcoin.
Schiff has acknowledged the fact that some people have successfully benefitted from Bitcoin but he believes that they represent a small proportion of an otherwise larger population that is bound to fail profoundly in trading Bitcoin. He is remembered as the one who regarded Bitcoin as “digital fool’s gold” and likened the virtual coin to the ill-famed bubble in Beanie Babies.
In an August 2017 interview with CoinDesk, Schiff rounded up Bitcoin and all other forms of virtual currencies as mere bubbles. He cited the psychology of bubbles as the key reason for the sustained investor excitement in trading the coins.
Concerning this, people validate cryptocurrencies based on the mere fact that their prices have been rising from their inception. He maintains that the price trends are only a result of speculation, not solid financial growth.
Jamie Dimon, Chairman of JP Morgan Chase, has also touched on the Bitcoin debate before. His resolve on the Bitcoin issue seemed firm as he had leveled numerous attacks against the virtual currency at a banking industry function organized by Barclays.
This occurrence sparked a wave of reactions from prominent Wall Street icons that responded to his statements.
Dimon, the leader of one of the four most significant American banks, openly called Bitcoin “a fraud” and according to him, it’s just a matter of time for the bubble to fall on all its investors. The government would see to it that the Bitcoin does not continue.
This means that authorities would have to shut down all digital currency systems after their spread. Dimon later stated he regrets calling Bitcoin a fraud but maintains his steadfast concern about how governments will react to the Bitcoin boom. Still, he admitted that the blockchain-based technologies behind Bitcoin carry potential as they’re applicable to conventional financial systems.
Furthermore, Bridgewater Associates Founder Ray Dalio has stated that Bitcoin has a long way to go concerning its adoption as an actual currency. He maintains that the virtual coin does not represent tangible wealth owing to its tumultuous nature of market volatility. Unlike gold, Bitcoin is a wild bubble that thrives on mere speculation and investor excitement.
While opinion on the Bitcoin case varies in today’s society, the negative perception of cryptocurrencies can be attributed to the governmental fear of the crypto industry itself. If Bitcoin ruled, central banks would be rendered irrelevant and the government would forfeit the supreme control it exercises over its people.
It is perhaps for this reason that investors like John Hathaway, the famous gold man, came out to dismiss cryptocurrencies as “garbage.”
The Academic Opinion
Aside from vocal Wall Street moguls, the academic society has not been left out in the Bitcoin discussion.
Nonetheless, academic experts have not been abrasive in their approach to the cryptocurrency question.
They have expressed concerns about the possibility of appraising cryptosystems through a robust rational model.
Joel Stiglitz is one such scholar.
The former World Bank chief economist and current university professor notes that the regulation—by governmental influence—of cryptocurrencies is critical in cushioning economic systems from the digital bubble.
In his view, Bitcoin’s former price increases were expectedly unsustainable.
Robert Shiller, a Nobel Prize laureate and economist, faulted Bitcoin investors for failing to back their decisions with rationality. Bitcoin trading is fundamentally contingent on patterns of speculation and wishful thinking. According to him, Bitcoin’s value is ambiguous.
Nouriel Roubini, another bright mind in the spheres of academia, seems to agree with the Wall Street kingpins’ opinions. He believes that Bitcoin is a massive speculative bubble that will come crashing down on unsuspecting investors.
From these arguments, it appears that the Bitcoin debate will continue attracting tough stances on the crypto trade. Bitcoin’s price problems have seemingly added salt to injury because everyone is talking about it.
No one appears to be interested in debating the supposed merits offered by other virtual coins or the integration of non-conventional institutions of money into fiat currencies.
While glossing over hypotheticals, it would be easy to believe the nay-sayers since Bitcoin stands to be an asset that can only be priced and traded—nothing more than that. In relatable terms, Bitcoin is that stranger in your house that acts like a dormant time bomb; you will never know when they will strike your territory.