The Faults of Crypto — Rebuttal to Dr. Nouriel Roubini

I would like to preface this by saying that since I first heard of Bitcoin in 2012 I have been a stout supporter of crypto-currency and the potential it has on the future marketplace and economy. The future in my scope is truly bright and I see it has a steam-engine with no brakes — it will change the world whether people want it to or not. With that being said we must take criticism and accept the faults that are apparent and need to be remedied before mass-adoption is achieved. I am looking specifically at Dr. Nouriel Roubini famed as ‘Dr. Doom’ for predicting the 2008 recession.

To start Dr. Roubini is by no means ignorant to the modern economy — in fact quite the opposite. He is a New Keynesian Economist who received his Ph.D. at Harvard in 1988 on the back of the 1980s recession and came up during the mass-financialization of the modern economy. As stated by Dr. Roubini on CNBC: “Cypto is the mother or father of all scams and bubbles” (https://www.cnbc.com/2018/10/11/roubini-bitcoin-is-mother-of-all-scams.html). He calls out specifically the fact that market has tanked more than 65% in the last year per the bear market we’ve all felt and been a witness to in 2018 dubbing it the ‘crypto-apocalypse.’ He has also stated: “Bitcoin is not money. To be money it would need to be a unit of account, means of payment, and a stable source of value and purchasing power. Bitcoin is none of these. Other cryptos are worse.”(https://www.forbes.com/sites/jasonbloomberg/2018/08/25/dr-doom-economist-nouriel-roubini-bearish-on-everything-crypto/#1fafc357226d) Dr. Roubini has also been on the record stating that all ICOs are a scam and there is no future for crypto and that it is simply a fad that those who are financially illiterate fell for. (https://www.forbes.com/sites/naeemaslam/2018/08/31/nouriel-roubini-says-blockchain-is-useless-all-icos-are-scam/#51208f2b3f3a)

Let’s dissect some of the statements made my Dr. Roubini. Firstly — “Crypto is the mother or father of all scams and bubbles.” It is hard to argue with statistical evidence shown in the 65% drop over the last year but this is far from the first bear market in the history of crypto. Bitcoin is celebrating its 10th birthday in a few years — 10 years! That means that all currencies that rival or partner with the father of all crypto (Bitcoin) are less than a decade old. Remember mid-90s Internet? Remember early 2000s Internet? I was born in ’92 so I apologize for my ignorance but I remember when a maintenance man came over and hooked up my parent’s computer to the phone line in 2002, in comparison Crypto-currency is in a stage of infancy that only those who are truly interested in the technology seem to notice. This is not a ‘crypto-apocalypse’ this is growing pains.

Dr. Roubini is also noted to dissect the problem with crypto in that it is not a currency. For transparency sake I felt it necessary to pull the Webster dictionary definition of a currency: “A circulation as a medium of exchange. General use, acceptance, or prevalence.” (https://www.merriam-webster.com/dictionary/currency) Crypto is not generally accepted by the masses but it can be with mass adoption. How that is done is on us the early-adopters — we must rely on modern technology to connect this currency to the mainstream user. Once our grandparents are using it than we can rest easy. There is a unit of account, means of payment is expanding every month and year, and lastly the stable source of value and purchasing power is key to its success. This last point is what I think we need to take away as true issue. I will touch on this again at the end.

The last issue I saw that Dr. Roubini has with Crypto is fraudulence of a vast majority of ICOs. I am constantly being queried to support ICOs primarily out of Japan, Russia, and Eastern Europe on my LinkedIn page and it is clear — there is a money grab and a vacuum of regulation. A solution to this may upset a lot of people but it is a valid point — people are looking to get rich with as little effort as possible, should a safeguard be required?

Two points of emphasis that I believe are valuable for us to expand on — the fraudulence of ICOs and crypto being seen as a stable source of value and purchasing power. These are both issues in the crypto space that are hampering the mass adoption of the technology. ICOs need some source of regulation for it to be adopted on a mass-scale. This is a tough pill to swallow but hear me out — people are scarred especially with their money. They do not want to lose it all and it takes just one man like Dr. Roubini with proven credentials to erode any confidence in the technology by the layman; this can only be remedied by structured regulation. I am open for lose rules but some kind of oversight needs to be implemented or mass-adoption is doomed and the entrepreneurship of these blockchain developers will go wasted. Lastly we need to discuss the stabilization on crypto as a dependable source of value and purchasing power. This is going to take time — we are in the infancy of crypto and it is clear that Dr. Roubini does not see it that way. We need to expect mass volatility that will likely continue for the next few years — but stabilization will come. The volatility and purchasing power of centralized currencies such as the U.S. Dollar, Euro, and British Pound are often ignored in these sorts of arguments. The value of these centralized currencies have rapidly diminished by we still see the dollar as 1 and the other two as tethered to its value. The value of the dollar has fallen 50% in the last 18 years alone and 634% since President Nixon refused the dollar to be exchanged for gold — how can we expect a fiat centralized currency controlled by a few of which have the ability to print it endlessly be the future of currency? ( https://data.bls.gov/cgi-bin/cpicalc.pl?cost1=1&year1=200001&year2=201809) Sure Bitcoin, Ethereum, Ripple, and the like have a large share being held by a few but there is a finite amount. We have digitized gold — let’s praise the geniuses that came up with it and push for its adoption. Centralized fiat currency has failed us and we need to go back to an economy that does not require that we bend to the will of the powerful and allows them to print endless dollars, mortgage our children’s future, and force us into mounds of debt that we had no say in gaining. If your issue lies in control I recommend understanding how hierarchies truly work — equality of the masses will never be possible in any competitive venture and innovation is impossible without competition. We cannot have it all but we can at least give fertile ground to those who want it all — bureaucratic control and a Federal Reserve has statistically proven to be a drain on our society. Don’t buy into the propaganda and don’t allow overarching fear to control your motives. When the market crashes again remember that it is due century long mortgaging future generations have to bear so those in charge can continue to devalue our work and print money to fund whatever thoughtless venture they see fit for power. The free market is not perfect but it is a vast improvement to our current system.