‘Black Swan’ author Nassim Nicholas Taleb recently described bitcoin (BTC) as a “detector of imbeciles.”
In a Jan.4 article, Taleb suggested that the cryptocurrency space and part of the technology will be wiped clean as the time of the “low-interest rate ‘Disneyland'” reaches its end. He suggested that “what we need is to return to a normal economic life, with interest rates of 4% to 5%.”
“What we have been experiencing for fifteen years is a kind of Disneyland, with near zero, sometimes negative, interest rates and therefore without real market functioning. Lowering rates creates asset bubbles without necessarily helping the economy. Capital no longer costs anything, risk-free returns on investment become too low, even negative, pushing people into speculation. We lose our sense of what a long-term investment is. It is the end of real finance.”Nassim Nicholas Taleb.
Taleb recognized that he used to like bitcoin and the cryptocurrency space, at least partly because he “was very critical of the Fed’s policy.” He explained that he “wrongly thought bitcoin would be a bulwark,” against poor monetary policy.
Taleb changes his mind
When Taleb published a report nicknamed “the bitcoin black paper” in 2021, he said that “in its current version, despite the hype around it, bitcoin had not managed to satisfy the notion of currency without government.”
He claimed that it cannot be either a short-term or a long-term store of value, cannot cover against inflation and “does not remotely constitute a shield against government tyranny or a vehicle to protect against catastrophic episodes.”
Despite Taleb’s comments, bitcoin has proved to be a key tool in keeping services such as WikiLeaks moving forward.
Bitcoin is doing fine
Forbes has gone as far as to suggest that “Bitcoin and WikiLeaks saved each other” in a 2019 feature, despite the coin’s pseudonymous creator Satoshi Nakamoto appealing to WikiLeaks not to accept bitcoin and avoid unwanted attention.
“It would have been nice to get this attention in any other context. WikiLeaks has kicked the hornet’s nest, and the swarm is headed towards us.”Satoshi Nakamoto.
Bitcoin surpassed even its creator’s expectations and survived all the unwanted attention and early attacks, proving the network to be much more reliable than it would be safe to expect such a young system.
Taleb also explained that Bitcoin’s comparison with gold is quite poor since “an entry on a register that requires active maintenance by interested and motivated people” such as bitcoin should not be expected to “retain its physical properties.”
This retention, he explained, is a condition for the retention monetary value since “we are not sure of the interests, mentalities and preferences of future generations,” and if neglected, bitcoin would collapse.
“Technology comes and goes, gold stays, at least physically.”Nassim Nicholas Taleb.
Still, while it would not collapse just like bitcoin, gold is expected by many market participants to lose much of its value if the belief that it has a financial role were to lose footing.
The industrial applications driven by the astonishing features of gold only account for a fraction of its demand. If its role in finance were to disappear tomorrow, the market could be inundated by the liquidation of financial gold reserves.