Paul Donovan, UBS’s Global Chief Economist said that the cryptocurrency bubble may be in its death throes, in his blog post. Donovan was interviewed by CNBC’s show Fast Money over his blog, where he stated that all cryptocurrencies “fatally flawed”.
Donovan titled his blog post as ‘I come to bury Bitcoin, not to praise it’ in which he talks about the rough phase the cryptocurrency market is going through, a bubble which will burst. Donovan called the designers of these currencies brilliant at Maths but they “know nothing about Economics.” Donovan said:
“To be perfectly honest I think anyone with a high school education in economics is been a Bitcoin skeptic right from the start. These things were never going to be currencies, they’re not going to be currencies at any point in the future.”
Donovan added that with a fair understanding of economics, it was clear that the hype created by Bitcoin, just influenced people due to new technology. It was certain that this hype will not result in anything good and will end badly. He thinks that the bankers who left their institutions to join this cryptocurrency space lacked the fundamental understanding of monetary policy.
However, Donovan acknowledged that there was a certain value in the distributed ledger system provided by the blockchain technology, but it failed to showcase any valid use cases at all in cryptocurrencies. When asked about the use of cryptocurrency at places without a proper government, Donovan said:
“If you don’t have a government then society gets a little bit more anarchic and in that situation something like the cryptocurrency does still come through, but the main problem with these things the absolute fundamental flaw is that they’re never going to be a store of value. Every economist knows the store of value is about balancing supply and demand and with crypto currencies you cannot control the supply in response to a drop in demand.”
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