Nouriel Roubini, a professor of economics at the New York University Stern School of Business and a well-known bitcoin detractor has recently claimed he believes bitcoin is the “mother of all bubbles,” and that its price has been pumped by Tether’s USDT.
In a prepared testimony for a Senate Banking Committee Hearing Nouriel, who’s colloquially known as Dr. Doom for his seemingly permanent bearish approach, claimed that cryptocurrencies have no intrinsic value and have started crashing this year.
In the testimony, Roubini argued the cryptocurrency bubble grew late last year as “literally every human being I met between Thanksgiving and Christmas of 2017 asked me first if they should buy them.”
He points out the market now entered a “crypto-apocalypse” as this year most cryptocurrencies are significantly down after the bubble burst. Bitcoin, the flagship cryptocurrency, is down nearly 80% from its mid-December all-time high near $20,000, according to CryptoCompare data.
Per Dr. Doom, cryptocurrencies aren’t money as their prices are volatile and aren’t widely accepted. Their value went up last year as “investors were buying cryptocurrencies not to use in transactions, but because they expected them to increase in value.” He added:
Until now, Bitcoin’s only real use has been to facilitate illegal activities such as drug transactions, tax evasion, avoidance of capital controls, or money laundering.
In his bearish approach, he further points out cryptocurrencies aren’t able to process as many transactions per second as traditional payment networks, and claims crypto proponents have turned to blockchain technology to claim it’s “the cure of all global problems, including poverty, famine, and even diseases.”
Per his prepared testimony, blockchain technology is no more than a “glorified spreadsheet or database.” The NYU professor points to Tether’s USDT and other stablecoins as the “biggest scam of all.”
“The Mother of all Manipulations”
According to Roubini the “mother of all manipulations” in the cryptocurrency space – to which he refers to as crypto land – is related to Tether and Bitfinex. Both companies share high-level executives, and the supply of USDT has been surging, even after Bitfinex saw Wells Fargo turn its back on it last year.
This saw critics claim the stablecoin is being issued to pump bitcoin, helping it reach its all-time high. In his testimony Dr. Doom mentions a study conducted by University of Texas professor John Griffin, which suggested the stablecoin was indeed used to manipulate BTC’s price.
He failed, however, to mention a study conducted by a University of Queensland Business School researcher that found there was no evidence connecting the issuance of USDT tokens to bitcoin price rises. Interestingly, as covered, the market has factored in the risk through a price premium that recently hit a 9-month high.
In the testimony, Roubini further points to a lack of security in the way cryptocurrencies work, calls decentralization a myth, and argues the tokenization of everything would lead us back to a world of barter. This, among other problems that include spoofing, wash trading, pump and dump schemes, and more.
Crypto Community Reactions
Roubini has also been sounding the alarm on Twitter, where various cryptocurrency community members reacted to his points of view. The CEO of ShapeShift, Erik Voorhees, responded to his tweet about the testimony by noting “fiat is the scam,” and adding some are building an alternative he isn’t obliged to use.
Fiat is the scam, Nouriel. Some of us are tired of it, so we're building an alternative. You're under no obligation to use it. https://t.co/3S6PJTN1QC— Erik Voorhees (@ErikVoorhees) October 10, 2018
Responding to comments regarding bitcoin’s potential to be a store of value after losing nearly 70% of its value in a few months, Voorhees replied:
Those who wish to store value with Bitcoin can do so. And those who wish to store value with USD fiat can do so. USD has lost 98% of its value in the past hundred years, but you're free to keep holding it. I prefer not to.
Gabor Gurbacs, director of digital asset strategy at New York-based investment management firm VanEck, noted his document was filled with “uncorroborated & false statements,” as well as false information on criminal activity, scalability, and more.