Author and risk analyst Nassim Nicholas Taleb took aim at cryptocurrency in a recent television interview, arguing that the continued relevance of Bitcoin and other blockchain assets was an accident of a monetary policy that has caused many assets to be grossly overvalued.
Speaking on CNBC’s Squawk Box, the renowned philosopher of probability reiterated his confidence that Bitcoin ought to be valued at zero in unsparing language, alleging that the continued value of cryptocurrency is a “tumor” driven by an overly loose monetary policy.
“Bitcoin is still in use. It’s still at 20,000; it’s not at, you know, at a thousand or zero. So we still have things that need to be corrected.”
When asked if Bitcoin was a “signal,” Taleb retorted in perhaps his most scathing remarks about the cryptocurrency to date.
“I call it a tumor. There is something that produced this tumor … real estate is another tumor.”
The Arabic-speaking statistician attributed the “tumor” largely to the policies of the Federal Reserve, whom he claims has created an economy where many assets are vastly overvalued relative to their ability to deliver long-term profits.
“I think that we’ve had 15 years, 14 and a half years, of Disneyland that basically has destroyed [the] economic structure. Think about it—no interest rates,” Taleb opined in the Squawk Box interview.
“The Fed overshot by lowering interest rate [sic] too much. The first hundred basis points work, the second much less; at zero interest rate now, of course, for a long period of time, you are hurting the economy, creating bubbles, creating tumors like Bitcoin.”
Though Taleb was unambiguous in his assessment of cryptocurrency, he has not always been so critical of blockchain assets. In 2020, Taleb expressed support for cryptocurrencies, counseling the people of his native Lebanon to “[u]se cryptocurrencies!” as a means to work around the Lebanese government’s restrictions on the payment of remittances to the country in foreign currencies.
The germ of Taleb’s present opposition to cryptocurrency may be traced to a dispute with Coinbase’s customer support in June 2020, which culminated in the investor closing his Coinbase account. By the subsequent February, Taleb claimed to have sold all his cryptocurrency assets, calling Bitcoin a “failure” because it was too volatile to function as a usable currency.
At a glance, cryptocurrency would seem incongruous with one of Taleb’s favorite concepts—the so-called “Lindy effect,” which the Arabian pundit popularized and fleshed out with mathematical rigor. The Lindy effect stipulates that one is more likely to encounter a non-perishable entity or institution towards the middle of its lifespan than at the beginning or the end, and therefore that those things that have persisted for long are likely to persist into the future for the same amount of time. This principle may explain some measure of heuristic prejudice against cryptocurrencies, none of which can boast a lifespan greater than that of a typical high school student.
Thus, it is perhaps unsurprising that Taleb has pivoted to a broad skepticism of cryptocurrency, which he now claims has an expected value “no higher than zero.” Last year, the Black Swan author published the paper “Bitcoin, Currencies, and Fragility,” in which he argues that cryptocurrency technology fails to address the problems it purports to solve.
Curtis Yarvin, founder of the decentralized internet platform Urbit, concurs that monetary policy may be responsible for the wild fluctuations in the price of cryptocurrencies, though he expresses greater agnosticism about the possibility that the value of Bitcoin may fall to zero.
“I agree that loose money makes Bitcoin possible,” Yarvin told The Epoch Times.
“Loose money means perpetually increasing debt, which covers structural losses in a structurally unsound economy.”
Yarvin, who is perhaps best known for his monarchist political writing and frequent podcast appearances, has maintained a longstanding interest in monetary policy, and has been similarly critical of the Federal Reserve’s precedent of a zero interest-rate policy, from which the central bank has only recently begun to retreat in the face of rising inflation.
However, unlike Taleb, Yarvin is more optimistic about the longevity and potential upsides of cryptocurrency, which he attests may become more valuable in the long-term as loose money becomes unavoidable for central banks, creating demand for less easily manipulated stores of value.
“I think the tumor has a future because I don’t see any way for this economic system to escape loose money,” Yarvin added.
Yarvin has emphasized the propensity of crypto winters to deter casual and imprudent investors, causing panic selling among those he believes are not truly saving in cryptocurrency.
“In periodic contractions, the tide goes out and we see who’s swimming naked. Everyone is swimming naked, they have no choice. But these contractions cannot be sustained, because they are too painful. This is why buying in a contraction winter is often a good idea.”
An inquiry from The Epoch Times about the Taleb’s remarks was passed on to the Lebanese intellectual by his associate Paul Skallas. Taleb, whose criticism of journalists is well-documented, responded by posting to Twitter a screenshot of the inquiry and linking to the bitcoin black paper. Notwithstanding the subtle jibe, Taleb did not directly respond to the request for comment.