Value of Bitcoin is not zero, it’s negative: Dr Doom

The fundamental value of Bitcoin (BTC) is not zero, it is negative, Nouriel Roubini, one of the vociferous critics of the crypto currency, warned as large-scale institutional and corporate players continued to ramp up their allocations for crypto assets.

Roubini, famously dubbed “Dr Doom” for his dismal warning of the Global Financial Crisis of 2008, reiterated his hard-core cynical stance on the crypto market in its current form “as being not just a bubble, but a huge scam” in his keynote speech on BTC and its fundamental value at the recent CoinGeek Zurich conference.

The first of Roubini’s observations was the fact that “cryptocurrencies” are not at all currencies, as they lack the variety of features that actually “make money money, or make currency a currency.”

“I have gone to many crypto conferences where if you essentially sign up for it you have to pay for it in dollars or Swiss francs, not in Bitcoin,” Roubini said.

Roubini, a professor of economics at New York University’s Stern School of business, also stuck to his long-held view that Bitcoin is falsely being portrayed as a store of value.

“Look at what happened in the last month, about a month ago in April, Bitcoin (BTC) reached an all-time peak of $64,000. And then a few weeks later, it went down to almost $30,000. Bitcoin is not even a hedge against risk off episodes. People say it is an uncorrelated asset that does well when, say, global equities are doing poorly. That’s absolutely not true,” Roubini said.

Dr Doom’s relentless diatribe came as crypt asset cap swelled to an astronomical level. In April, the global cryptocurrency market zoomed past $2 trillion in market capitalisation amid a surge in institutional demand with Bitcoin alone contributing more than $1 trillion after its price soared almost four times over the past 12 months while ethereum rocketing 1,000 per cent during the same period. As of Monday, the global crypto market cap was $1.71 trillion, while the total crypto market volume on Monday was $93.6 billion.

“We know that nothing is priced in Bitcoin, no goods and services or financial assets. And this is not just because people don’t want to do so, but there are flaws, because for something to be a unit of account it must have a stable value,” Roubini said.

Exposing the obvious technical flaws in BTC, Roubini said neither is BTC used widely, nor is it a scalable means of payment.

A new analysis by Nickel Digital Asset Management (Nickel), Europe’s leading regulated investment manager dedicated to digital assets market, revealed that 19 listed companies with a market cap of over $1 trillion have around $6.5 billion invested in Bitcoin. They originally spent $4.3 billion buying the cryptocurrency.

An analysis by Nickel reveals some $43.2 billion worth of bitcoin is held through various bitcoin closed-ended trusts and exchange-traded products. These investment funds hold these allocations on behalf of their clients, including a range of retail investors, asset managers, and - increasingly - institutional asset allocators.

Nickel research from earlier this year with institutional investors and wealth managers across Europe who collectively manage over $110 billion in assets, revealed that over the next two years 81 per cent expect to see an increase in corporations using Bitcoin for their treasury reserves. Of these, some 29 per cent expect to see dramatic growth in this trend.

Anatoly Crachilov, co-founder and CEO of Nickel Digital, said a growing number of corporations have recently made significant multi-billion allocations to Bitcoin as part of their treasury reserve strategies. “This, coupled with a confirmed inclusion of crypto-assets in the portfolio construction by leading global asset managers such as Paul Tudor Jones, Bill Miller, Ruffer, and Guggenheim Partners, is a very important endorsement for Bitcoin’s emerging functionality of the hedge against inflation.”

Crachilov said the Covid-19 crisis and the expansionary monetary policies implemented by the central banks in response to the crisis have dramatically changed the outlook for fiat currencies, heightening the risk of currency debasement. “This, coupled with the increasingly inflationary guidance by Fed and an ever-expanding pile of $18 trillion of negatively yielding global bonds, has encouraged many corporations to contemplate an allocation to alternative assets.”

— issacjohn@khaleejtimes.com

• Cryptocurrencies