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Bitcoin is worth zero and there is no evidence that blockchain is a useful technology, Black Swan author Nassim Taleb says

Business Insider logo Business Insider 2021-06-23 (Isabelle Lee)
Nassim Nicholas Taleb sitting in front of a window: REUTERS/Shannon Stapleton © REUTERS/Shannon Stapleton REUTERS/Shannon Stapleton

"Black Swan" author Nassim Taleb doubled down on his criticism against bitcoin - this time, saying the cryptocurrency is worth exactly zero, and that there is no evidence that blockchain is a useful technology.

In a recent six-page draft paper titled "Bitcoin, Currencies, and Bubbles," Taleb laid out four key arguments against the cryptocurrency, which he promoted to his 743,000 Twitter followers.

First, the author said that in spite of the hype, bitcoin failed to satisfy the notion of "currency without government." In fact, he said, bitcoin proved to not even be a currency at all.

"The total failure of bitcoin in becoming a currency has been masked by the inflation of the currency value, generating (paper) profits for large enough a number of people to enter the discourse well ahead of its utility," he said.

Taleb's second criticism said bitcoin can neither be a short nor long-term store of value. He used the famous juxtaposition of gold versus bitcoin - which he said was poor comparison - to illustrate his point.

"Gold and other precious metals are largely maintenance-free, do not degrade over a historical horizon, and do not require maintenance to refresh their physical properties over time," he said. "Cryptocurrencies require a sustained amount of interest in them."

His final two points argued that bitcoin is not a reliable inflation hedge, contrary to some analysts' views, and is not a safe haven for investments - whether meant to protect against government tyranny or other catastrophes.

Video: Musk Should Do More Study on Bitcoin Mining, Kraken CEO Says (Bloomberg)

"Not even remotely," he said, citing the March 2020 market panic when bitcoin sank lower than the stock market, as well as the recent ransom payments following the Colonial Pipeline cyberattack, which authorities were able to track.

"Government structures and computational power will remain stronger than those of distributed operators who, while distrusting one another, can fall prey to simple hoaxes," he added.

Read more: A managing partner at a venture fund that's backed more than 30 blockchain unicorns compares the technology today to the dot-com boom of the 1990s - and breaks down 4 platform types and the cryptos leading each one into the future

Taleb has been a vocal critic of bitcoin, but the paper also slammed the underlying technology bitcoin relies on. The author pointed to what he sees as a lack of utility of blockchain technology.

"There is no evidence that we are getting a great technology -unless 'great technology' doesn't mean 'useful.'"

He continued: "And we have done -at the time of writing -in spite of all the fanfare, still close to nothing with the blockchain."

In April, Taleb told CNBC that bitcoin is an open Ponzi scheme and a failed currency.

He hasn't always been a bitcoin bear, though. In 2017, Taleb wrote the foreword to "The Bitcoin Standard," a book by economist Saifedean Ammous.

Back then, Taleb wrote that bitcoin is "an excellent idea" as it "fulfills the needs of the complex system … because it has no owner, no authority that can decide on its fate."

Bitcoin on Tuesday continued to tumble, falling as much as 10% to $29,333. It has now slid more than 50% from its all-time high of nearly $65,000 in April.

Analysts have said if the world's largest cryptocurrency prints consecutive daily closes decisively below the support level, it could see further downside to $20,000 - back to its level in December 2020.

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