“Dr. Doom” Roubini adds insult to injury and once again shorts Bitcoin

In an interview with Goldman Sachs' magazine "Top of Mind", New York University economist Nouriel Roubini, who accurately predicted the 2008 crisis, once again denied the possibility of Bitcoin and other cryptocurrencies as inflation-proof investments. In fact, Roubini believes that cryptocurrencies are not any kind of currency or asset at all.

He pushed back against the idea that cryptocurrencies represent a new form of money, arguing that they fail to meet four criteria: as a unit of account, as a means of payment, as a stable store of value, and as a single digital currency, or benchmark for comparing the value of similar financial instruments. He repeated his joke: “The Flintstones even had a more complex system, using seashells as a single digital currency to compare the prices of different goods.”

According to Roubini, cryptocurrencies do not fit the definition of any one asset class.

An asset has some cash flow or utility that can be used to determine its fundamental value. A stock provides dividends, which can be discounted to arrive at a valuation. Bonds provide coupons, loans provide interest, and real estate provides rent or housing services. Commodities like oil and copper can be used directly in different ways. Gold is used in industry, jewelry, and has historically been a stable store of value to protect against a variety of tail risks, including inflation, currency debasement, financial crises, and political and geopolitical risks. Bitcoin and other cryptocurrencies do not have similar utilities, so they cannot constitute their intrinsic value.

In Roubini's view, the sharp rise in cryptocurrency prices over the past few years has the characteristics of a market bubble. "When the price of something is far above its fundamental value, there is a bubble," he said. "But we can't even determine the fundamental value of these cryptocurrencies, and their prices have risen dramatically. This is a bubble to me."

He also said, “Bitcoin is not even a reliable hedge against risk events, let alone inflation shocks. In fact, it is highly procyclical…. In bad times, the value of crypto assets does not rise, it only falls.