Nassim Nicholas Taleb - author, mathematical statistician and former options trader - has reversed his stance on cryptocurrency, calling Bitcoin a clear failure. The author "The Black Swan" said in a paper he published that Bitcoin has failed in its mission to become a currency without government and as a reliable hedge against inflation.
Taleb had previously spoken favorably when talking about Bitcoin and other cryptocurrencies. Just like other cryptocurrency evangelists, Taleb touted the potential of Bitcoin as a tool to circumvent capital controls. In 2018, he once called Bitcoin the world's "first organic currency" and an "insurance policy" against total government control.
In his recent paper, Taleb reversed course and said Bitcoin's worth is now "exactly zero" as most of its value only relied on sustained interest. He said unlike gold and other precious metals, Bitcoin's value can "degrade over a historical horizon." He said in his paper titled "Bitcoin, Currencies and Fragility" that gold does not require maintenance.
Bitcoin - the world's largest cryptocurrency - is notoriously volatile. Throughout the pandemic, the digital asset experienced extreme volatility. Taleb said that Bitcoin's drop in March 2020 was only able to recover "upon the massive injection of liquidity." He said the dip and subsequent recovery is "sufficient evidence that it cannot remotely be used as a tail hedge against systemic risk."
Taleb warned that Bitcoin's response to external factors is still unclear. He said there is no telling how the asset would react to disasters such as regional outages or a financial collapse. Taleb said Bitcoin has maintained high volatility of between 60% and 100% throughout its existence.
"It is indeed desirable to have at least one real currency without a government. But the new currency just needs to be more appealing as a store of value by tracking a weighted basket of goods and services with minimum error," Taleb said.
Taleb said Bitcoin's success as a digital currency is vastly different from its success as a speculative investment. He said Bitcoin will need to stabilize before it becomes a usable currency.
