Top economists are warning about trusting Bitcoin – Here is why!

BENGALURU:  In an interview with an Indian economic news portal, the economist who correctly predicted the global financial crisis of 2008 believes Bitcoin is the ‘classic bubble.”

Raghuram Rajan said while it is hard to say if the world is in for another bust, he cited Bitcoin and Tesla’s astonishing rise as examples of bubblish behaviour by markets, stoked by easy monetary policy and very low-interest rate.  

“I think one has to look around the world. Bitcoin reached $40,000 after being at $10,000 in the beginning of, of last year. So Bitcoin is the classic bubble, right, it produces no value. It is an asset, which can’t even be used for payment because it is really difficult. And yet it hit $40,000. So why are people buying Bitcoin, because they think it will go up. And that is bubblish thinking.”

Another leading figure in the world of global economics, Christine Lagarde, President of European Commercial Bank was also scathing in her criticism and pointing out the dangers.

FRANKFURT: Bitcoin has come out of its niche in recent years and is now bought by ordinary people, investment funds and even large corporations. Some have even taken out loans to buy more of the cryptocurrency, whose value has increased almost tenfold since last March.

But its largely anonymous nature has raised concerns that it could be used for money laundering and other illegal activities.

“(Bitcoin) is a highly speculative asset, which has conducted some funny business and some interesting and totally reprehensible money laundering activity,” Lagarde said in an interview at the Reuters Next conference.

Lagarde did not provide specific examples of money laundering cases but said she understood there had been criminal investigations into illegal activity. She did not elaborate.

The cryptocurrency sector is still mostly lightly overseen or unregulated, although global standards on areas such as anti-money laundering (AML) have emerged.

She joined a number of regulators from across the world in calling for implementing global rules for cryptocurrencies.

Bitcoin has come out of its niche in recent years and is now bought by ordinary people, investment funds and even large corporations. Some have even taken out loans to buy more of the cryptocurrency, whose value has increased almost tenfold since last March.

But its largely anonymous nature has raised concerns that it could be used for money laundering and other illegal activities.

Transactions are not processed by a bank but recently it has fallen into mainstream use, with payments app Paypal now accepting it. Its value shot up from around $29,000 at the turn of the new year to almost $41,000 last week, and is now at $35,800.