Risk Analyst Nassim Taleb Says Bitcoin Is A Failed Currency

Nassim Nicholas Taleb – author, mathematical statistician and former options trader – has reverse his stance on cryptocurrencies, calling Bitcoin a clear failure. The “Black Swan” author said in an article he published that Bitcoin has failed in its mission to be a currency without a government and as a reliable hedge against inflation.

Taleb previously spoke favorably when talking about Bitcoin and other cryptocurrencies. Like other crypto evangelists, Taleb touted Bitcoin’s potential as a tool to bypass capital controls. In 2018, he called Bitcoin “the world’s first organic currency” and an “insurance policy” against total government control.

In his recent article, Taleb reversed course and said Bitcoin’s value is now “exactly zero” as most of its value relies solely on maintenance interest. He said that unlike gold and other precious metals, Bitcoin’s value can “decline over a period of history”. He said in the article titled “Bitcoin, currency and fragility” that gold is maintenance-free.

Bitcoin – the world’s largest cryptocurrency – is notoriously volatile. Throughout the pandemic, digital assets have experienced extreme volatility. Taleb said that Bitcoin’s drop in March 2020 could only be recovered “when liquidity is massively pumped in.” He said the drop and subsequent rally were “sufficient evidence that it cannot be used remotely as a tail-guard against systemic risk.”

Taleb warns that Bitcoin’s response to external factors remains unclear. He said there was no word on how the property would respond to disasters such as a regional shutdown or financial collapse. Taleb said Bitcoin has maintained a high volatility of 60% to 100% throughout its existence.

“It’s really desirable to have at least one de facto currency without a government,” said Taleb. But this new currency just needs to be more attractive as a store of value by tracking a basket of goods and weighted service with minimal error”.

Taleb said Bitcoin’s success as a digital currency is vastly different from its success as a speculative investment. He said Bitcoin will need to be stable before it becomes a usable currency.

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