David Stockman has told CNBC’s Futures in an interview in 2018 that cryptocurrency investors’ marketplace is “stupid speculators” and will experience a “spectacular crash.”
Former Director of the Office of Management under President Ronald Reagan of the Office of Management David Stockman has revealed to that CNBC’s Futures Now in an interview that those who invest in the cryptocurrency market “stupid speculators” and will be hit by the consequences of a “spectacular crash.”
“It’s basically a class of really stupid speculators who have convinced themselves that trees grow to the sky. It will burn out in a spectacular crash. All of these latter-day speculators will have their hands burned to a crisp, and they will learn the proper lesson.”
The argument that is weak
In the last few years, Stockman has also expressed his negative view of the stock market in general and has predicted the possibility of a “gigantic, horrendous storm” that will hit stocks. In essence, Stockman has predicted literally every cryptocurrency and asset on the world market to decline in value over an indefinite time, making his forecast and argument ineffective.
Economists such as Stockman as well as Paul Krugman have been unable to present convincing arguments for why investing in the cryptocurrency market as well as crypto assets like Bitcoin as well as Ethereum can be described as “stupid.” Stockman and Krugman have said the fact that Bitcoin has become a bubble, and that cryptocurrency does not possess intrinsic value or value.
But, as billionaire investor Mark Cuban explained, the intangible value of the asset is the case for all assets or currency that is traded on the market. Even currencies that are entirely controlled by the government in terms of circulation and supply do not possess intrinsic value because their worth is based on the market and the demands of investors. If people, businesses, and investors choose not to use the US dollar and its value falls, it will be lowered.
In the Vanity Fair New Establishment Summit, 2017 Cuban stated:
“It is fascinating because there are lots of assets whose value is based solely on demand and supply. The majority of stocks have no intrinsic value since you don’t have any real ownership rights or voting rights. You only have the power to purchase and sell stocks. Bitcoin is the same. The value of Bitcoin is determined by demand for supply. I’ve bought it through an ETN which is based off an exchange in Sweden. Swedish exchange.”
It is easy to criticize the value of an investment or particular stock by citing basic reasons such as the absence of intrinsic value, or the speculation on the market. It is, however, difficult to pinpoint the arguments for the reasons why stocks are undervalued and are being dragged into short-term bubbles.
Furthermore, it’s impossible to categorize those who invest in the market for cryptocurrency as speculation. A lot of investors in the market for cryptocurrency comprehend the technology behind the decentralized currency like Bitcoin and the potential for them to take on the multi-trillion market like the gold and offshore banking markets. This is enough for them to be able to justify their investments in the market.
Cryptocurrencies are not bubbles.
Although it is likely for Bitcoin and other cryptocurrencies to have temporary bubbles, cryptocurrencies generally do not represent bubbles. It is among the most liquid markets in the world. Bitcoin is the most sought-after cryptocurrency on markets and is more than the most liquid stock in the world, Apple which has a value of the annual trading volume of $12 billion.
There are also major corrections for cryptocurrencies frequently throughout the month. Their value can drop by more than 30 % on daily basis before recovering. Corrections stop short-term bubbles from forming, while speculators lose interest and the market swells.
Stockman has also stated that cryptocurrencies aren’t real money as transactions aren’t stable. Transactions on the most popular public Blockchains such as Bitcoin, Ethereum, and Litecoin are handled on an efficient network with an efficient fee structure as well as a consensus algorithm.
“I have no idea. I mean it could double or triple from here or it could fall to zero. But the point is that it’s not real money because real money for transactions has to be stable,” Stockman added.
So these were Stockman’s thoughts in 2018. Have things changed? Will he prove prescient or just wrong? I’ll let you know in 10 years…