Renowned Economist Joseph Stiglitz: 'We Should Shut Down Cryptocurrencies'

Joseph Eugene Stiglitz, a prominent American economist and the recipient of the Nobel Memorial Prize in Economic Sciences (2001), has argued that the existing financial system would become more efficient if electronic payments were used to settle most transactions.

Stiglitz, who has received more than 40 honorary degrees from prestigious universities including Cambridge and Harvard, believes the world’s financial system and the global economy would be “better regulated if all the data [was accessible] in real-time.”

Using Real-Time Data To Improve The Economy

Stiglitz noted during an interview with CNBC that by analyzing real-time data, we would be able to learn about people’s spending habits and having access to the latest financial information would also help the US Federal Reserve in more accurately determining interest rates.

He added that the availability of the latest financial data would allow for “better macroeconomic management.” According to Stiglitz, an electronic payments system and access to real-time financial data would help prevent "illicit economic activities.”

Cryptocurrencies Moving Monetary Transactions To A "Dark Platform"

However, the former chief economist at the World Bank said “it disturbed [him] a great deal [when] cryptocurrencies” were given a lot of attention. Notably, Stiglitz thinks cryptocurrencies are moving the world’s financial system “off [or away] from a transparent platform and into a dark platform.”

He continued: 

We know about the role of real estate and money laundering. We know from the Paradise Papers, Panama Papers...the extent of this money laundering. We know from research in recent years, [from] the work of [French economist] Gabriel Zucman … the large percentage of global wealth that is held in these dark havens. So, if we want a more efficient economy without these illicit activities, I think we’re going to have to move to more of an electronic payments mechanism.

Stiglitz further mentioned that “we will have to figure a way out to have the transparency of an electronic payments mechanism without the dangers of the surveillance.”

“There’s No Need For Anybody To Go To A Cryptocurrency”

When questioned about whether the USD should also become the world’s electronic reserve currency, Stiglitz said: 

[The USD] is a very good currency…[it] has been running in a very stable way. There’s no need for anybody to go to a cryptocurrency. In our standard courses in Economics, we talk about the attributes of a good currency and the USD has all those attributes. Cryptocurrencies do not have those attributes.

Stiglitz also recommended “shutting down” cryptocurrencies.

Bullish Bitcoin Investors Are Ignoring Institutional Bears

Neil Dennis

Bitcoin investors remained positive this week, despite data showing that bearish bets on the futures market had increased during the previous week.

Positioning data on CME Bitcoin futures showed that institutional managers held 14% more short positions in the seven days to Friday, June 21, than in the week before, according to the Commodity Futures Trading Commission (CFTC).

Futures trade allows investors to back an asset's losses as well as gains: short positioning means backing an asset to fall in price over a defined period.  The increase in the CFTC short position data on CME Bitcoin futures, therefore, would indicate growing bearishness by the larger institutional players.

Playing it by the Charts

They may have been playing it by the charts. The previous two tops occured in mid-May when the price of Bitcoin reached a high of $8,352 before falling back nearly $1,000, and then at the very end of May reaching $9,066 before falling back to $7,807.

Bitcoin's price performnace

The chart shows that in the week to June 21, when shorts on CME Bitcoin futures grew, Bitcoin pushed up above $10,000, in a chart pattern that might have led many to believe another pullback was imminent.

This drop, predicted by many institutional investors, never came, however, and private investors continued to back the Bitcoin rally. Indeed, the CFTC report showed that smaller investors continued to hold more long positions - backing the continued rally: investors with fewer than 25 Bitcoin futures contracts showed four times as many long positions than shorts.

Short Covering

This may help explain how the rally of the last couple of weeks gained momentum, as those on the institutional side joined the buying to cover their short positions.

Tanya Abrosimova, analyst for FXStreet, said:

Many experts believe that at this stage Bitcoin is driven by FOMO (fear of missing out), while the market repeats the situation of late 2017.

It is also likely that Facebook's announcement about the lauch of its Libra cryptocurrency caught the institutional shorts on the wrong side of the market. Since the Libra announcement on Tuesday, June 18, Bitcoin has gained more than 30%.

Abrosimova added:

Looking technically, Bitcoin has been growing strongly for eight days in succession, which is the longest period of uninterrupted growth since December 2017. As BTC/USD is trying to take out a new barrier at $12,500. Once it is out of the way, the next bullish target of $13,000 will quickly come into view.