Nassim Taleb says Bitcoin has no worth and fails as a decentralized currency

Author of ‘Black Swan’ Nassim Taleb says Bitcoin’s worth is equal to zero and has failed as a currency and a hedge against inflation.

The author who spoke in favor of bitcoin before has now reversed his stance on the cryptocurrency writing in a recent paper that bitcoin has failed to justify the notions surrounding it as a safe haven investment and a hedge against inflation. He added that in financial history only a few assets have been more fragile than bitcoin.

In the recent paper “Bitcoin Currencies, and Fragility” published in June, Taleb said the current worth of bitcoin is “exactly zero” because it requires a sustained level of interest to maintain it. This is in contrast to other assets like gold and other precious metals which are “largely maintenance free, do not degrade over an historical horizon, and do not require maintenance to refresh their physical properties over time.”

Bitcoin trading fell more than 40% in June, according to cryptocurrency exchange CryptoCompare. The price of bitcoin hit a monthly low of $28,908 in the same month. 

As of Tuesday morning price of bitcoin was between $32,000 and $36,000, after briefly hitting $40,000 in mid-June.

Taleb’s former stance of bitcoin was in favor of the cryptocurrency, particularly its potential to help people to avoid capital controls in the market that require them to use their exchange rates. In the foreword of “The Bitcoin Standard (2018)” He called bitcoin the “first organic currency” and “an insurance policy” against governments’ control over currencies.

“It is indeed desirable to have at least one real currency without a government,” Taleb wrote. “But the new currency just needs to be more appealing as a store of value by tracking a weighted basket of goods and services with minimum error.”

Since the emergence of bitcoin in 2008 it’s been known to be notoriously volatile, though profitable. The cryptocurrency saw all-time high volatility due to the coronavirus pandemic last year which caused a global economic crisis. Taleb cited that in March 2020 the price of bitcoin fell further than the stock market and only recovered “upon the massive injection of liquidity.” He added that the evidence was sufficient enough to show that the cryptocurrency cannot be used as a “tail hedge against systemic risk.”

Taleb said that people tend to conflate the success of bitcoin as a digital currency and its success as a speculative investment. To qualify as a currency, bitcoin would be required to have some stability and usability.