By Josiah Wilmoth
One of the most highly-regarded economists in the US said that he believes the bitcoin price is in a bubble and will “likely burst” over the long-term, even if it continues to appreciate in the short-term.
Bitcoin Price Rally is a Bubble, Says Renowned Economist
Jeffrey D. Sachs, a university professor at Columbia University, made this claim in an op-ed published in the Boston Globe on Wednesday.
The Blue Planet Prize winner wasted no time getting to the heart of the matter:
“It is hard to see bitcoin’s price surge as anything other than a bubble that will ultimately collapse,” the piece begins. “Bitcoin’s ostensible social function as an anonymous, nongovernmental means of payment carries big risks of its demise.”
As Strategic Coin has chronicled, the bitcoin price has increased approximately 1,400 percent in the past year, from $1,000 at the beginning of last year to a present value of $14,851, according to data from Coinbase.
Sachs alleged that, contrary to the attestation of its proponents, bitcoin contains several flaws that foretell its eventual doom. The crux of his argument is that once central banks begin to view bitcoin as a credible threat, governments will declare war on cryptocurrency and suppress it out of existence through hostile regulatory policies.
“As governments tighten their grip, bitcoin prices will most likely fall, and perhaps collapse, though the timing is impossible to judge. Bitcoin seems too prone to illicit use and too vulnerable to government regulation to survive for the long term,” he portends.
Bitcoin Is Uncensorable
Sachs’ statement that the timing of bitcoin’s supposed demise is impossible to judge is convenient, as it allows him to say “I told you so” if it occurs but does not provide his critics with the same opportunity.
However, setting this quibble aside, Sachs’ argument ignores that bitcoin’s greatest value proposition is that it is a truly-uncensorable asset. While the government can attack it at the service level, prohibiting centralized cryptocurrency trading and refusing to accept it as payment for taxes, bitcoin’s lack of a central authority prevents regulators from attacking the network itself.
For the first time, individuals located across the globe can conduct transactions without the need for permission from a third-party. Bitcoin is, according to the common parlance, like having a Swiss bank account in one’s pocket.
Moreover, as recent events have demonstrated, bitcoin’s global ecosystem makes it inherently antifragile to hostile actions from individual governments. China, once thought by mainstream financial analysts to be bitcoin’s grim reaper, placed an outright ban on both cryptocurrency trading and initial coin offerings (ICOs) last year, and the markets recovered from the disruption in a matter of days.
That’s not to say that bitcoin will never enter a bear market, nor does it mean that governments cannot put short-term pressure on the bitcoin price. What it does mean, however, is that as long as its supporters continue to believe in the power of a decentralized network, bitcoin can endure even the most hostile regulatory environments.
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Featured Image from Sense and Sustainability