BitcoinBusiness & Finance

Why Bitcoin Will Fail? A Case Against Bitcoin by Best Economists of the World

Global financial regulators have not yet acted more stringently because the crypto market is still relatively small. Once it becomes significant they will use the hammer.

Despite the global acceptance of digital currency in the market, there are many financial experts believe that the crypto market is not going to last for a very long period of time. Many major American economists and financial experts have recently spoken negatively about Bitcoin’s (BTC) chances for survival. Among them are the Nobel Prize-winning economist Joseph Stiglitz, Kenneth Rogoff and Nouriel Roubini who argued that cryptocurrency has no intrinsic value and bitcoin will fail as a currency due to its price volatility.

Joseph Stiglitz is also a professor of economics at Columbia University,  argued about cryptocurrency particularly bitcoin, that anonymity of bitcoin contradicts the idea of the alternative transparent banking system. And because of this anonymity cryptocurrencies will allow malicious activities like illegal buying and selling of prohibited goods and services and no government will allow such activities.

Another financial expert, Harvard professor and former chief economist at the International Monetary Fund (IMF) Kenneth Rogoff, also criticized bitcoin because of its use in money laundering and tax evasion. Rogoff claimed that even if bitcoin is the top-priced cryptocurrency, it would be worth as low as $100 in ten years.

I would see $100 as being a lot more likely than $100,000 ten years from now, Basically, if you take away the possibility of money laundering and tax evasion, [Bitcoin’s] actual uses as a transaction vehicle are very small.Rogoff

Rogoff also talked about the government involvement in the crypto market for regulatory purposes and regulations will force the price of Bitcoin down, instead of up. Rogoff, unlike many industry commentators who welcome the regulations as a step towards mainstream acceptance and adoption, is one of very few diminishing numbers of traditional financial experts still maintaining a firm anti-Bitcoin stance, and warning investors that government will take care of this “anonymous currency transactions”. In the favor of his argument, he presented a report from the South Korean Central Bank Bank of Korea (BOK). According to the report, outstanding balance of virtual currency accounts in domestic banks totaled $1.79 billion (2 trillion won) as of Dec. 2017, which is only 8% of total deposits operated by the country’s brokerage houses, worth 26 trillion won ($23.27 billion). Therefore, crypto markets do not pose a threat to traditional local financial markets.

The amount of crypto-asset investment is not really big, compared with other equity markets, and local financial institutions’ exposure to possible risks of digital assets is insignificant. Against this backdrop, we expect crypto-assets to have a limited impact on the South Korean financial market.

Another financial expert and an economist at the New York University, Nouriel Roubini, also talked about the cryptocurrency particularly bitcoin as it is the most valued cryptocurrency in the market. Roubini argued that bitcoin has none of 6 main characteristics of money. He also argued about the stability of its value as Bitcoin is something that falls 20% one day and then rises 20% the next, and how can it be a stable store of value? He said during an interview that looming regulations will be the nail in the coffin of Bitcoin, and it will find its end.

I think that more and more countries will start to make cryptocurrency exchanges illegal like China did. New regulations will be adopted. So, this will find its end. In my opinion, there is a gigantic speculative bubble related to the Bitcoin. Because this is neither a serious method of payment nor a good way to store capital. The Bitcoin feeds on itself.Nouriel Roubini

Roubini, along with other panelists at the Milken Institute Global Conference, argued against the bitcoin and said that “all this talk of decentralization is just bulls**t” and digital coins are not a store of value and face scalability issues in comparison with centrally intermediated payment systems.

During the conference, he said that bitcoin is the mother of all bubbles, much bigger than any bubble in human history and bitcoin or any one of this cryptocurrency is not a currency by any mean. Because to be a currency it has to have three functions, it has to be a unit of account, has to be a mean of payment, and has to be a stable store of value, first of all there is no good or service at this price into bitcoin, its not a mean of payment and the technological constraint is the most important one whether you are taking bitcoin how many transactions per second you can make? given the block size is only five and in case of ethereum its only 7 transactions per second you can make. So there is a massive problem of scalability and other 1500 currencies cannot even solve the problem of scalability.

 You cannot have scalability, security and decentralization at the same time.

Cryptocurrencies present a low risk to financial stability in the country, also pointing out the limited involvement of traditional financial institutions and systems.

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Muhmmad Furqan

Furqan is a financial markets expert. A regular trader of cryptocurrencies and hold some investments in Bitcoin, Stellar, IOTA and OST. Contributes with latest industry insights. Email: editor.news@blockpublisher.com

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