A prominent economists herald bitcoin’s demise. Both have elicited a barrage of responses. What they have in common is as follows.
Krugman recalls that on October 21, when bitcoin was trading at record levels exceeding $60,000, Singapore-based Crypto.com famously aired the “Fortune Favors the Brave” ad starring Matt Damon, implying that investing in crypto is an act of bravery comparable to that of mountain climbers or astronauts.
As the cryptocurrency market plummeted, the commercial was widely mocked, even appearing in the most recent South Park film. This has not stopped Crypto.com from becoming a sponsor of the FIFA World Cup Qatar 2022.
The advertising has not been confined to movie and sports stars; Bindseil and Schaaf underline that “Large investors also finance lobbyists who promote their cause with politicians and authorities. From 115 in 2018 to 320 in 2021, the number of crypto lobbyists in the United States has nearly quadrupled. Their names read like a who’s who of US regulators at times.”
A group of technological professionals urged US politicians in June 2022 to oppose plans to create a “regulatory safe haven” for Bitcoin. “The assertions made by blockchain enthusiasts are false,” said Harvard professor Bruce Schneier, a member of the committee behind the current crypto warning, to the Financial Times.
“It isn’t secure, and it isn’t decentralised. Any system in which you forget your password and lose your life savings is not secure.”
Regulation lags behind.
“The crypto ecosystem has effectively developed into exactly what it was designed to replace: a system of financial intermediaries whose ability to operate is dependent on their perceived trustworthiness,” writes Krugman. However, law covering crypto-assets has been sluggish to approve in recent years, and implementation is frequently delayed.
Cryptocurrency is not money.
“After 14 years, however, cryptocurrencies have made practically no inroads into the conventional function of money,” writes Krugman. They’re too uncomfortable for everyday transactions. Their values are far too volatile.”
“Bitcoin’s conceptual design and technology flaws make it doubtful as a form of payment: genuine Bitcoin transactions are tedious, sluggish, and costly,” say Bindseil and Schaaf. Bitcoin has never been utilised extensively for legitimate real-world transactions.”
