Yet another Nobel prize winner thinks Bitcoin and cryptocurrencies as a whole are irrational and represent a bubble.
Richard Thaler, of the University of Chicago, who won the Nobel prize in economics last year, spoke about the debt market, but went on to single-out cryptocurrencies as irrational markets, in a written statement given to ECO:
“I can see that there is a bubble in the debt markets, with interest rates close to zero or even negative, and even in the indices, which are at record highs. But the market that strikes me the most is bitcoin and its sisters.”
The economist then went on to cite examples such as that of Long Island Iced Tea, a company which changed its name to Long Blockchain, and saw its share price rise by more than 200%. He also spoke about the increased volatility experienced by cryptocurrencies, calling them extreme events, not seen in ‘normal markets’.
While he didn’t have any predictions for when the bubble would burst, he did say, “there is already historical evidence of what can happen when the irrationality of markets creates "abnormal" financial situations” – pointing towards the stock market crash of 1987, the dot-com bubble and the real estate bubble.
Nobel prize winners are unparalleled in their respective fields, and Bitcoin has attracted its fair share of criticism from top economists. Earlier this week we also reported on Nobel laureate Robert Shiller’s comments on Bitcoin. He not only questioned Bitcoin’s value, comparing it to gold, but also likened it to the Tulip Mania in 17th century Holland.
While it is true that Bitcoin is a largely speculative asset, which is very sensitive to news, events and regulatory proposals, most economists and critics believe Bitcoin is likely to touch even higher price levels before finally crashing.