Bitcoin is a Tumor Created by Easy Money Says Nasim Taleb - is He Right?
Risk management guru and author of "The Black Swan," Nasim Taleb, has taken a jab at Bitcoin, calling it a tumor created by easy money.
In an interview with CNBC, the New York Times best-selling author called Bitcoin, as well as the real estate market, a "tumor" that has been brought on by incompetent monetary policy. He opined that years of zero percent interest rates maintained by the U.S. Federal Reserve Bank damaged the economy and created bubbles like Bitcoin.
"At zero interest rates… for long periods of time, you are hurting the economy. You're creating bubbles, creating tumors like bitcoin, creating hedge funds that should not exist but have existed for 15 years," Taleb said.
His statement is in reference to the Fed holding funds target rate at a range of 0% to 0.25% between 2008 and 2015 to tackle the 2008 global financial crisis. The Fed also cut rates to near zero again in 2020 in response to the COVID-19 pandemic.
Taleb maintained that this easy-money monetary policy has left an entire generation of investors oblivious of the effects of a recession - a phenomenon that last occurred in the 1980s. However, they are in for a rude awakening as the Fed is now determined to slow down inflation by implementing interest rate hikes to bring markets "back to normal economic life."
When asked what he would consider normal, he said he expects the interest rate to rise to around three to four percent.
Does Bitcoin price drops coinciding with Fed rate hikes prove Taleb right?
This is not the first time the former options trader has criticized Bitcoin. Last year, he called the pioneer digital currency a "contagious disease" and an "obsolete product of low-interest rates" that has "zero value" in an interview with CNBC.
Meanwhile, the Fed's drive to rein in inflation has been having a marked effect on the price of Bitcoin. According to historical data pointed out by TIME, the price of Bitcoin dropped by at least 10% following the first three Fed rate hikes in March, May, and June.
The report asserts that while the July rate hike was less severe, there is a clear pattern of Fed rate hikes corresponding with drops in the crypto market. This is why it expects that the rate hike the Fed could implement next week will again rock the market.
Regardless, Bitcoin proponents have held the asset continues to serve the purpose it was created for in 2009 in the long term. According to the Bitcoin white paper, the creation of Bitcoin was prompted by the failure of economic policies and lack of transparency that resulted in the global market crash of 2008.