Nassim Taleb is not impressed with anything about bitcoin.
The author of best-selling “big think” books about investing did not have a single good thing to say about the cryptocurrency in a recent keynote to CoinGeek/Zurich. He made it very clear where he stands — as far as possible from it.
In what appears to be a video link-up with the conference, Taleb looks down into the camera and, thus, down to the viewer. He speaks in the arrogant and supercilious style which he’s become quite well known for.
You can hear in his “get off my lawn” voice how much contempt he has for bitcoin buyers and for anyone who might disagree.
Taleb broke down what he views as the major issues into 5 categories:
1. It fails as a currency because Bitcoin is a speculative investment that requires “miners” without which transactions are not clearly validated. To put it in Taleb-ian terms, the necessity for mining operations is a sign of fragility in the cryptocurrency’s world. He compares it to gold which requires no similar maintenance once extracted and coined.
2. It fails as a store of value because Bitcoin offers no yield to its holders. If it had some kind of artistic value such as with with paintings or jewelry, that might be different, but it doesn’t even have that.
Taleb says scenarios exist that could drive the price to zero, such as the possible extinction of miners or that the technology heads into obsolescence as more advanced new tech replaces it. He states that “if any non-yielding asset has the tiniest possibility of hitting an absorbing barrier then its present value must be zero.”
3. It fails as an inflation hedge, he says, because items need to be priced in a currency that lacks volatility. This is not the case with Bitcoin. Taleb notes that gold eventually failed as a currency when precious metals prices jumped crazily during the 1978 to 1981 period as the Hunt Brothers attempted to corner the silver market.
4. It fails as a tail risk hedge, according to Taleb, because it won’t protect a portfolio in the case of a market plunge. For example, he mentions how Bitcoin sold off significantly during the March, 2020 pandemic shock — anyone who attempted to hedge with the crypto got hit.
5. The best-selling author of Fooled By Randomness and The Black Swan suggests that the cryptocurrency phenomenon is little more than the “monetization of a form of neo-Pagan worship.” In his video presentation, he shows a slide of the 1969 Woodstock festival, apparently as an example of such neo-Pagan worship.
It’s just below an “HODL” sign on the same slide — the “hold on for dear life” designation which some Bitcoin holders cling to. If you saw video of Max Keiser and Michael Saylor before participants at the Bitcoin Miami conference a few weeks ago, you begin to grasp what Taleb is getting at.
(Side note: it’s pretty funny to see Taleb reference an event as American as Woodstock when his previous writings are almost entirely and tiresomely Eurocentric. I wonder if he knows, for example, the difference between Duane Allman and Greg Allman and what the “family” stands for in Sly and the Family Stone.
If you’re going to use a Woodstock frame of reference when making points, a true scholar would want to understand the details in full. I get the feeling someone he trusts told him about it or he read about it and that he hasn’t actually watched the movie or listened to the album.
He was probably too busy reading — in English, French, German, Italian, Russian and Sanskrit — the complete works of Socrates, Plato, Aristotle, Wittgenstein, Umberto Eco, Hegel, Marx and Toynbee. What, you haven’t read all of those in at least 4 languages? Tsk, tsk, tsk.)
Here’s the Bitcoin daily price chart:
Lately, it’s been trading in a range from 42,000 to 30,000. This follows the big plunge from the all-time high in April up there near 64,000. As long as the price remains below that Ichimoku cloud, it’ll be in a downtrend. This is some remarkable volatility for such a widely-covered asset class.
Here’s the Bitcoin monthly price chart:
You can see how Taleb might be convinced that the cryptocurrency is in a bubble. That’s a mighty quick up and down over quite a bit of price territory: from below 2500 in 2017 up to 65,000 early this year and then a drop back to 30,000. Bitcoin has that bubbly look right now no matter how greatly its adherents brag about the future.
Not investment advice.