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Nouriel Roubini has warned and predicted the Global Financial Crisis (2007-2009), and consequently earned a reputation of a world-renowned economist. This week, he testified before the U.S. Senate Committee on Banking, Housing, and Urban Affair regarding cryptocurrency and blockchain technology; not surprisingly it has correlated with his prior caustic anti-crypto stance.
His testimony is all about how blockchain technology cryptocurrencies are over-hyped, and how they are the source for various scams. He has found that lots of people, having no financial knowledge, are highly interested in crypto deals and Bitcoin; however, scammers and criminals are exploiting this opportunity to take advantage of people’s lack of familiarity and expertise to abuse this new digital financial world.
Roubini has also noticed three times the increase in the Bitcoin price whose value has reached $20K in the last month of 2017.
Here are several of the important points from Roubini’s testimony:
Blockchain – The technology associated with cryptocurrencies
The underlying technology of crypto is blockchain, and it is thought that this technology could solve global issues, like famines or poverty, and even help conventional financial institutions. However, Nouriel Roubini believes that it is only an overvalued database, and nothing more than that.
In the later part of the previous year, the Bitcoin bubble has dropped by 70 per cent. For other currencies, it was more than 80%. One of the studies has revealed that 81 per cent of ICOs are scams.
Although Bitcoin is known as a type of currency, it is not payment means or value store. Investors have bought cryptocurrencies with the intention of finding an increased value from it. They do not use them for transactions.
Deflationary Bitcoin and the massive crypto supply
While fiat currencies have good intrinsic value, cryptocurrencies does not have it.
Fiat currency is usable for buying a service or product, and there is no risk of value debasement from the banks. However, it is true that the steady Bitcoin supply had the presence of fiat currency, and it had also decreased the price index of products and services.
Lots of different cryptocurrencies, including those that are generated through fraudulent ICOs, are created daily, and they violate the security law of the country. The supply of these currencies is debased with fiat. Thus, the rapid and continuous creation of cryptocurrencies depreciates their own value. Roubini has found that most of them have lost 95 percent of their value within one mere year.
Crypto, consuming energy and affecting the environment
Bitcoin and various other cryptocurrencies consume much energy. Crypto supporters must feel shameful for the environmental disaster they encourage and in which they occasionally partake. Roubini thinks that this environmental issue should be reduced to the minimum. The cost of energy usage has already reached $5 billion in one year.
Nowadays, lots of crypto scammers use media for spreading fake news; however, Roubini has no interest whatsoever in investing in the digital financial world of cryptocurrency.