While cryptocurrency proponents maintain that the sector is growing and poised to enter the mainstream, as evidenced by the recent interest from traditional finance players, not everyone shares the same view.
In particular, ‘The Black Swan’ author Nassim Nicholas Taleb has trashed cryptocurrencies such as Bitcoin (BTC) for deficiencies suggesting that the sector is a ‘cult,’ in an interview with CNBC on June 22.
Highlighting what he considers a unique characteristic of Bitcoin, Taleb claimed that it represents the fusion of a financial instrument and a cult, which is unprecedented in the history of the financial world.
Taleb expressed his skepticism regarding the digital currency’s ability to serve as a practical means of transaction and inflation hedge.
“It did exactly the opposite of its mission as an inflation hedge because it collapsed. <…> It is pretty much the first time in the history of the world we have had a cult, coupled with a financial instrument,” he said.
Bitcoin’s past doesn’t count
The author stressed the importance of assessing an asset’s potential drawdowns and risks rather than focusing solely on its past performance. Notably, he initially had a positive outlook on Bitcoin as a response to his disappointment with the policies of the Federal Reserve.
While acknowledging that cryptocurrencies may be suitable for small transactions, Taleb dismissed their effectiveness in facilitating large-scale money laundering due to the purported inherent traceability of blockchain technology. Indeed, one criticism of the sector has been the ability to facilitate vices such as money laundering.
“The thing is, it may be good for transactions, petty transactions, or small amounts of money, but it’s not good for real money laundering because it’s very traceable,” he added.
Crypto power concentration
At the same time, Taleb expressed concern over the concentration of power among major players within the crypto space, contrasting it with the transparency and influence that can be exerted over the Federal Reserve. He characterized the impact of cryptocurrencies as distracting, raising doubts about their long-term implications.
The acclaimed author suggested that cryptocurrencies, including Bitcoin, have prompted central banks, such as the Federal Reserve, to adopt a more proactive approach. He alluded to upcoming developments from the Fed, hinting at potential changes in response to the crypto phenomenon.
As the debate surrounding cryptocurrencies continues, Taleb’s critical assessment of Bitcoin brings to light ongoing concerns regarding its practicality, stability, and concentration of power within the crypto ecosystem.
As reported by Finbold previously, the author has sounded the alarm on Bitcoin’s viability as a financial instrument claiming it has adverse effects on the economy. In this line, he called Bitcoin a ‘tumor’ that is bad for the economy.
Watch the full interview below: