Following the spectacular price crash of the cryptocurrencies in the past few weeks, during which they collectively lost over $500 billion of their market value, senior management at some of world’s largest banks and leading economists have once again voiced their concerns of the future of cryptos, or outright have slammed them.
The first one this week was the general management of the Bank for International Settlements, Agustin Carstens. In a lecture in Frankfurt Carstens, who heads the “central banks’ bank” where the likes of the Federal Reserve and Bank of England hold accounts, expressed his concern on cryptocurrencies and questioned their legality and sustainability.
“While perhaps intended as an alternative payment system with no government involvement, it has become a combination of a bubble, a Ponzi scheme and an environmental disaster,” he said, quoted by CNBC. “The volatility of bitcoin renders it a poor means of payment and a crazy way to store value.” Further Carstens noted that financial regulators and authorities should impose some regulations and make sure that the cryptocurrencies are not used for tax evasion, money laundering and financing of criminal activities. He also said that the authorities should “rein in” the cryptocurrencies because of their links to the established financial system and should police the “digital frontier.”
Roughly at the same time Carstens was speaking in Frankfurt, leading economist Nouriel Roubini warned that the bitcoin price will crash to zero. In a series of tweets Roubini, who recently called bitcoin the “biggest bubble in human history”, said that the “HODL nuts” will hold bitcoin until it plummets to zero. (HODL stands for “hold on for dear life” and refers to traders who hold on to their bitcoins in times of price plummets, hoping the price will go up again, rather than selling.) He also said the cryptocurrencies hysteria is “much worse than the Tulip Mania” (the world’s first economic bubble during which contract prices for some bulbs of the tulips in Holland reached extraordinarily high levels and then dramatically collapsed in February 1637) and went all to call the cryptocurrency enthusiasts “Cryptocrazies,” and “Cyber-Terrorists.”
Similarly, Steve Strongin Goldman Sachs Group Inc.’s global head of investment research, wrote in a report that most digital currencies are unlikely to survive in their current form, and investors should prepare for coins to lose all their value as they’re replaced by a small set of future competitors. According to Strongin, most likely the coins will never reach the peaks from the end of December 2017 again. Instead, most cryptocurrencies of today would crash to zero. Further in his report Strongin likens the cryptocurrencies to the dot-com bubble of the 1990’s and says that few might survive, but most will not.
“Are any of today’s cryptocurrencies going to be an Amazon or a Google, or will they end up like many of the now-defunct search engines? Just because we are in a speculative bubble does not mean current prices can’t increase for a handful of survivors,” Strongin said, quoted by Bloomberg. “At the same time, it probably does mean that most, if not all, will never see their recent peaks again.”
The head of the World Bank Jim Yong Kim did not differ much. At an event in Washington on Wednesday, he compared cryptocurrencies to “Ponzi schemes”.
“In terms of using Bitcoin or some of the cryptocurrencies, we are also looking at it, but I’m told the vast majority of cryptocurrencies are basically Ponzi schemes,” he said, quoted by Bloomberg. “It’s still not really clear how it’s going to work.”
Meanwhile, against the background of all this doom and gloom, the top 100 cryptocurrencies all rose against the USD on Wednesday and the cryptocurrency market cap surged by $89 billion, a 24-hour increase of 29%.