Gold or Bitcoin? Beware of malignant tumor, says Black Swan guru

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Is Gold or Bitcoin the Best Investment? Opinions vary widely, with billionaire Mark Cuban favoring Bitcoin and Euro Pacific Capital CEO Peter Schiff going the other way.

This week, Nassim Nicholas Taleb, author of the 2010 New York Times bestseller The Black Swan and one of the few to predict the 2007-2008 financial crisis, weighed in on the debate during an interview with the weekly LExpress.

It’s safe to say that Bitcoin, which has fallen over 60% since the start of 2022, fails to impress him.

Technology comes and goes

A problem with Bitcoin, he said, is that we are unsure of the interests, mindsets and preferences of future generations. Technology comes and goes, gold remains, at least physically. Once neglected for a brief period, Bitcoin would necessarily crash.

Further, he said, an entry on a ledger that requires active maintenance by interested and motivated people, this is how Bitcoin works, cannot be expected to retain its physical properties, condition of monetary value, for a period of time.

Asked about the origins of the cryptocurrency craze, he pointed to the low interest rates of the past 15 years.

Lower rates create asset bubbles without necessarily helping the economy, he said. Capital no longer costs anything, returns on risk-free investment become too low, even negative, leading to speculation. We lose our sense of what a long-term investment is. This is the end of real finance.

One of the results, he argued, was malignant tumors like Bitcoin.

The bubble of everything

Taleb is not alone in noticing the effects of what has been dubbed the bubble at all created by years of loose monetary policies by the Fed and other central banks in the wake of the Great Financial Crisis. As Fortune reported this week, the era of easy money was filled with bulls, from crypto pundits and hedge fund managers to economists and investment banks, who thought the good times never happened. would never end.

Interestingly, Taleb supported Bitcoin from the start. At the time, as he explained to LExpress, he was critical of Fed Chairman Ben Bernanke at the time.

Bernanke, he said, failed to see the structural risks in the system before the 2008 crisis, and overreacted afterwards: instead of fixing debt and mitigating hidden risks, he covered with a monetary policy that is supposed to be only transitory. I mistakenly thought that Bitcoin would be a bulwark against the distortions of this monetary policy.

Manipulators and scammers

Taleb also warned that the crypto universe attracts manipulators and scammers.

Hes certainly not alone there.

Coinbase CEO Brian Armstrong said at the a16z crypto Founder Summit in late November: We have to kind of come to terms as an industry with the fact that, I think our industry attracts a disproportionate share of fraudsters and scammers. And that’s really a shame. This does not mean its representative of the entire industry.

(Armstrong added that it was baffling why FTX founder Sam Bankman-Fried wasn’t already in custody weeks later, he was.)

Taleb tweeted this week that he was trolled and smeared for his criticisms of crypto, but such attacks were outweighed by the many messages of thanks for saving young people from bitcoin.

He shared a post in which a Twitter user said he almost bought Bitcoin, but then started following Talebs thinking about it, writing I got it why crypto is shit in theory. Then he went broke in training. NNT saved my dad’s hard earned money.

Meanwhile, many Bitcoin bulls remain bullish. Ark Invest CEO Cathie Wood recently reiterated her prediction that Bitcoin will hit $1 million by 2030, it is now just below $17,000. She also argued that Bankman-Fried didn’t like transparent, decentralized Bitcoin because he couldn’t control it, saying the FTX fiasco was caused by opaque centralized players.

As for Cuban, he said on the Bill Mahers Club Random podcast last month, I want Bitcoin to go down a lot more so I can buy more.

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