There’s never a day that passes without some otherwise intelligent economist making radical claims about bitcoin. It’s all been said before. “It has no intrinsic value,” “it’s used by criminals,” “it will be regulated,” “it will fall to $0.”
And media outlets are happy to share these opinions, with doom-and-gloom headlines to add fuel to the fire.
The Three Horsemen of the Bitcoin Apocalypse
On July 10th, Joseph Stiglitz, Nouriel Roubini and Kenneth Rogoff looked to breathe fresh air into their campaign against the cryptocurrency citing once again the lack of intrinsic value, anonymity and regulation. They even offered a shocking 10-year price prediction - $100.
In the interview with Financial News, Nobel-Prize winning Stiglitz noted: “You cannot have a means of payment that is based on secrecy when you’re trying to create a transparent banking system."
While the irony may be palatable for many in the crypto-community, it’s not as though Stiglitz is completely clueless in the world of policy or economics. Though he has taken a controversial stance on many issues, from globalization to the Eurozone, he has at least expressed respectable and well researched opinions on these matters.
In the case of bitcoin, however, his one-liners and extreme positions based on his perceived understanding of how the cryptocurrency functions leave a lot to be desired.
“If you open up a hole like bitcoin, then all the nefarious activity will go through that hole, and no government can allow that,” Stiglitz said.
Joining Stiglitz in the interview, Kenneth Rogoff, former chief economist at the International Monetary Fund, explained: “Bitcoin could easily be worth just $100 in 10 years,” adding “People in power will move to regulate anonymous transactions. That you can be sure of.”
It’s worth noting, however, that the idea of bitcoin being used primarily in illegal activity has been debunked time and time again.
The simple fact is: bitcoin is no longer as anonymous as these economists might believe. In fact, with strict KYC/AML regulations in place in most international exchanges and blockchain analysis companies such as Chainalysis and BlockSeer, bitcoin may now be easier to trace than cash.
The third Horseman in the interview, however, Nouriel Roubini, the man that predicted the 2008 crisis, went straight for the kill – attacking bitcoin as a currency.
The notoriously bearish “Dr. Doom,” as Roubini is sometimes called, explained: “For bitcoin to be a currency it has to be a unit of account, a means of payment, and a stable store of value. It is none of these. Bitcoin is not even accepted at bitcoin conferences, and how can something that falls 20% one day and then rises 20% the next be a stable store of value?”
Bitcoin’s 10-year plan
Arguing against Roubini’s point, a research paper published by Imperial College London, one of the top 10 universities in the world, claims that bitcoin or another cryptocurrency could become a mainstream payment option worldwide within the next decade.
Imperial professor William Knottenbelt wrote: "There's a lot of scepticism over cryptocurrencies and how they could ever become a day-today payment system used by the man on the street. In this research we show that cryptocurrencies have already made significant headway towards fulfilling the criteria for becoming a widely accepted method of payment."
In the paper, “Cryptocurrencies: Overcoming Barriers to Trust and Adoption”, a number of topics are covered, from the evolution of money to the challenges bitcoin will need to overcome in its path to mainstream adoption.
The report addresses bitcoin as a currency, suggesting that it is well on its way to meeting the criteria to be accepted as money, though challenges remain.
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Though the study does echo similar sentiments put forth by Siglitz, Roubini and Rogoff, it takes a more sober approach to the future of bitcoin and other cryptocurrencies. The paper even highlights some of the developments such as the Lightning Network and atomic swaps that aim to tackle scalability and more.
In the conclusion of the report, Knottenbelt notes: “Some cryptocurrencies are beginning to satisfy these functions; however, we find that there are technical, legal, economic and social challenges currently restricting the degree to which cryptocurrencies are fulfilling the three traditional functions of money.”
For the sake of transparency, it is important to point out that the report was commissioned by eToro.
Though observations and predictions in the space are inevitable, and many times, reasonable, there is always a bit more to say. Though Siglitz, Roubini and Rogoff present valuable criticisms of bitcoin as a currency, the outright dismissal of it without acknowledging its potential may prove to be a mistake in the future.
And while their interview was syndicated with a $100 price prediction in the title, Knottenbelt’s was also misrepresented, as many of the titles surrounding Knottenbelt’s report suggested a clear pathway to adoption without acknowledging the challenges ahead.