The prominent economist – Steve Hanke – once again revealed his negative stance on bitcoin. According to him, the primary cryptocurrency is highly volatile, uncertain, and has a “fundamental value of zero.”
Is BTC Really ‘Snake Oil?’
Steve Hanke – Professor of Applied Economics at the John Hopkins University – took it to Twitter to warn investors to stay away from bitcoin. The 78-year-old American – who is a well-known cryptocurrency critic – does not see the leading digital asset as a “true currency.” He went further, calling it “snake oil” that “the crypto bulls are selling:”
“Its extreme volatility, susceptibility to fraud, and uncertainty are all reasons why BTC will never be suitable as a true currency.”
While bitcoin’s price fluctuations are indeed present, it is still a relatively new asset that could overcome its volatile nature in the upcoming years, especially with the implementation of proper legislation. Anthony Scaramucci – SkyBridge Capital’s CEO – recently compared bitcoin to Amazon, reminding that the e-commerce giant was also unstable in its early days but now is one of the most influential companies:
“Bitcoin is volatile because it is in its early adoption stage. Amazon had the same volatile curve 24 years ago. But if you have put $10,000 on Amazon at its IPO, you would have $21 million today.”
Hanke did not stop there as he concluded that bitcoin is a “highly speculative asset, with a fundamental value of zero.”
His words do have some merit here as bitcoin, just like almost every other investment, is a speculative tool. Some traders and investors use its fluctuations to generate profits. However, there’re also those who prefer to hold it as they believe it’s a digital store of value. Prominent names here include the legendary legacy investors Paul Tudor Jones III and Stan Druckenmiller.
At the same time, large corporations such as Tesla and MicroStrategy bought substantial portions of the asset. And, despite Hanke claiming that BTC has a “fundamental value of zero,” the asset already saw a significant milestone adoption event this year after the Central American country El Salvador made it a legal tender inside its borders.
Fraud and Uncertainty, Really?
As mentioned above, Hanke, who previously bashed El Salvador’s move, spoke about BTC’s supposed susceptibility to fraud and uncertainty. The former point is somewhat controversial, to say the least. Bitcoin’s blockchain is entirely transparent. All transactions are recorded on the digital ledger and can be seen by anyone with access to the Internet.
As such, although there’re still some reports claiming that certain bad actors have employed BTC to launder money or other illicit activities, the cryptocurrency’s nature makes it a highly inappropriate tool for those trying to hide their actions.
In contrast, FinCEN documents from last year revealed that well-regulated organizations like banks – including HSBC and StanChart – facilitated dirty money transactions worth more than $2 trillion.
Hanke failed to provide any more details on the “uncertainty” comment he made in regards to BTC, so it’s difficult to speculate on what precisely he meant. Nevertheless, the COVID-19 pandemic drove extremely high levels of uncertainty to all financial markets and, in fact, all parts of life last year. Within that time, bitcoin’s value against the dollar skyrocketed multi-fold, while the greenback itself – the reserve currency of the world – lost ground.
As far as the argument of failing as a currency goes, a recent transaction worth $2 billion in BTC was transferred from one address to the other, and the transaction cost was less than $1. Meaning that in just mere minutes, someone transferred an entire fortune without a third party. Such a transaction using the more traditional methods like banks or PayPal would be significantly more expensive (and slower).
Featured Image Courtesy of Europost
