Bitcoin is in a bubble, says Nobel winning economist who predicted US housing crisis
At the end of August, Bitcoin was priced at USD 4600, after rallying over 60 percent in a month. It has increased over 700 percent over the year
Some fifteen years ago, Nobel Prize winning economist Robert Shiller had famously spotted the first housing bubble of the 21st century in the US. Shiller also went on to write a best-selling book Irrational Exuberance on market manias around the world.
He has spoken again, and this time he has termed the frenzy around bitcoin as a bubble.
In an interview given to The Quartz, trying to explain what drives bubbles, the Yale professor said it is all about inventing a right story and promulgating it.
When asked to name the best example of a bubble happening right now, without hesitation, he said, “The best example right now is bitcoin. And I think that has to do with the motivating quality of the bitcoin story. And I’ve seen it in my students at Yale. You start talking about bitcoin and they’re excited! And I think, what’s so exciting? You have to think like humanities people. What is this bitcoin story?”
At the end of August, bitcoin was priced at USD 4600, after rallying over 60 percent in a month. It has increased over 700 percent over the year.
According to Shiller, the bitcoin bubble is a result of “a fundamental deep angst of our digitisation and computers”. People are anxious and unsure of their future. Somehow, the bitcoin story is providing a sense of empowerment.
“It starts with Satoshi Nakamoto—remember him? The mysterious figure who may or may not be real. He’s never been found. That has a nice mystery quality to it. And then he has this clever idea about encryption and blockchain and public ledgers, and somehow the idea is so powerful that governments can’t even stop it. You can’t regulate this. It kind of fits in with the angst of this time in history,” he adds.He, however, refrained from terming it as the biggest bubble. Though, he compared the frenzy with the story of Donald Trump. The way US president has understood the nerve of people and presented himself is commendable. “It’s just amazing how he dominates and I think he has a genius at recognising stories and listening to his audience and understanding what drives them,” he said.