Nassim Taleb: Bitcoin failed as a currency and became a speculative ponzi scheme
I admire the idea of having a public currency with no ties to governments. That might create a better, more equal future. But bitcoin is failing that and it&#x27;s what Taleb is talking about. I am not a working economist, but I am trained as one, and I would like to drop my two cents here.<p>I like the idea of having a public currency with no ties to governments because that makes our wealth safe from policies that have nothing to do with us, or our country. For example, I am Turkish and my wife is American. We are tied to the US and Turkey. Right now we earn some of our income in Turkish Liras, and some of it in US Dollars. The Turkish Lira(TRY) has been losing its value because of the incompetent financial management of the country. Basically our TRY wealth has lost half of its value in the past two years. Even though we don&#x27;t feel that loss locally we feel it globally. The disturbing thing is we did nothing wrong to lose half of our wealth. A small group of people at the head of the government, with their horrendous decisions made us lose half of our wealth in just two years.<p>Same situation is going on with the global economy as well. We haven&#x27;t felt the effects of Biden&#x27;s new stimulus package yet, but as more money enter the system, all of our wealth will get a hit because of the inflation. America bets that they are going to create enough wealth with the 2b they are going to spend on infrastructure and will handle the effects of inflation. But what about rest of the world? We don&#x27;t get anything, we will just lose our wealth.<p>When Bitcoin(BTC) was founded, the hope was to create a global currency with no ties with governments so we can preserve our wealth. But the speculative nature of Bitcoin makes it unsuitable for such a task. If BTC was stable enough, it would be preferable to gold to preserve wealth because it is easier to save and transfer. But you can&#x27;t trust BTC. Anybody who understands finance will tell you it is the biggest bubble economy has ever seen. People with financial backgrounds don&#x27;t trust BTC because it reminds them the previous economic bubbles that hurt global economy when the economy wasn&#x27;t global. Since BTC became mainstream and started growing in an unprecedented way, I fear the effects of the burst because I know about the south sea bubble of 1720.<p>In BTC kind of bubbles everything looks wonderful to the public until a lot of wealth disappears in a couple of weeks. It took four weeks for the south sea bubble to burst and to lose 75% of its value. I believe when the bubble bursts and panic sets in BTC will lose most of its value in a shorter time. Moreover, in this burst there will be no government to mend the economic hurt people will suffer. That&#x27;s what the economists are trying to warn people about.<p>When BTC people talk about BTC they usually talk from individual perspectives. They are earning a lot of money through BTC, so what&#x27;s the problem with that? They say people who are against BTC doesn&#x27;t get it, or are jealous because they are not earning money through BTC. Well, when the economists talk about BTC they talk about it from a global economic perspective. People can do what they deem worthy with their money, they can gamble, they can bet on BTC and try to earn more. Economists has no problem with that. Economists care about understanding the effects of the aggregate actions of people and economists don&#x27;t want people to lose 75% of their wealth in a couple of weeks knowing the implications. They warn against bitcoin because when people who invest huge amounts of their money on BTC lose their wealth there will be no doors to knock to ask for help.<p>The BTC people almost always say that BTC is like gold. Well it&#x27;s not. First, gold is tangible. You can have your gold and save it somewhere. Moreover, gold is one of the safest investments because over time gold price always increases. If you invest all of your wealth in gold, in the long term you will preserve your wealth. Can you say that with BTC? Of course not. You can&#x27;t be sure that people will continue valuing BTC after the bust. You can&#x27;t be sure that you will be able to sell your BTC after the bust. You can end up having some digits on some machines people are running for nostalgia. Moreover, gold is entangled in global economy and governments will interfere if the price of gold drops spectacularly. If the same happens to BTC, governments will shrug and tell that that&#x27;s why people should use government backed currencies.<p>Another fallacy BTC people has is listening to people who are not financial experts. People might be successful experts in other areas, but economics is a different beast. I am good at marketing and sales, and people consider me as an expert in those areas. Would you accept my advice on programming a Linux kernel? That&#x27;s happening with regards to BTC though. People who don&#x27;t know about economics and finance, spends their days giving financial advice to people. Even people who are experts at finance would always tell that what they are telling are not financial advice whenever they talk, because it is just their opinion — and also for legal reasons. But those BTC zealots don&#x27;t see a problem with suggesting people put their livelihoods and futures risk in an unstable, risky investment option.<p>We have to be reminded that, Newton, arguably one of the smartest human ever, and one of the most brilliant minds of his time with a great understanding of the financial events of his time, lost a huge part of his wealth when the bubble burst. You can read about it here: <a href="https:&#x2F;&#x2F;royalsocietypublishing.org&#x2F;doi&#x2F;10.1098&#x2F;rsnr.2018.0018#d3e1449" rel="nofollow">https:&#x2F;&#x2F;royalsocietypublishing.org&#x2F;doi&#x2F;10.1098&#x2F;rsnr.2018.001...</a><p>Yet, I don&#x27;t think BTC is a ponzi scheme. BTC is a risky financial instrument. NFT on the other hand is a beautiful ponzi scheme.