Crypto a Bubble Like No Other or a Ponzi Scheme. Is He Right?

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Some financial experts specializing in bubbles believe that crypto is either one of the biggest bubbles in history or a smart Ponzi scheme the likes of which have never been seen before.

2022 can be considered as one of the worst years for the crypto ecosystem as several high-profile DeFi and CeFi platforms have collapsed. In more notable examples, Terra/Luna ecosystem explodes While major crypto exchanges in May FTX collapsed in early November,

Nearly $2 trillion in value was wiped from the crypto market last year. While crypto proponents argue that this is not out of the norm, citing the crypto crashes in 2012 and 2017, when the market lost nearly 70% of its value, traditional financial experts are not sold.

For one, William Quinn, a senior lecturer at Queen’s University Belfast whose research focuses on financial bubbles, believes crypto is either a “stupid bubble” or “more stupid than any previous bubble” in financial history. A smarter Ponzi than any previous Ponzi”.

in one Article Last week, Quinn said tulip mania, a period during the Dutch Golden Age when contract prices for some bulbs of recently introduced and fashionable tulips reached extraordinarily high levels, by modern standards. was more of a “popular legend” than a true financial bubble. ,

He then argued that it “makes a lot more sense than the crypto bubble.” And according to the historian, the dotcom bubble that started in the late 90s is nothing more than a “very flattering comparison” for crypto. he said:

“It is a very flattering comparison and is often invoked as a pro-crypto argument. The problem is that crypto and blockchain, unlike the internet, are simply not very useful.”

Overall, Quinn mentioned three characteristics of the crypto industry that make it different from previous financial bubbles. First, he claimed that crypto assets have “no use-value” unless others are willing to accept them.

Second, they don’t generate cash flow. And finally, some digital assets like bitcoin have mining costs that can only be paid in fiat currencies. she added:

“Not all major cryptocurrencies are exactly like this, but most are close. These are uniquely terrible characteristics for an investment. Every previous bubble I’ve encountered has been either a commodity, a collectible, or a commodity with associated cash flows. property is included.”

Nevertheless, Quinn notes that not all cryptocurrencies are fraudulent because fraud requires a criminal. He specifically mentioned bitcoin, saying that the leading cryptocurrency was created as “an honest – if somewhat disjointed – political project,” but still claimed it was a bad investment.

Meanwhile, not all financial experts share the same view as Quinn. According to the report of World Economic Forum (WEF) Told The technology underpinning cryptocurrencies and digital assets will continue to be an “integral” part of the modern economy. The organization said:

“Indeed, as a test of the staying power of digital assets and blockchain at the core of financial services (and other sectors of the global economy), look at what big banks and established financial services companies do, not what they say.” “

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