Is bitcoin in a bubble or is it just tweaking its protocol? According to Nobel laureate economist Robert Shiller, bitcoin is in a bubble and its future doesn’t seem too bright after a rollercoaster ride this past month.
Writing an op-ed piece in the New York Times on Saturday entitled “In Search of a Stable Electronic Currency,” Shiller, a Keynesian economist, said that although it’s likely bitcoin is in a bubble and will eventually burst, good things can still arise from the virtual currency.
“Bitcoin's future is very much in doubt. Yet whatever becomes of it, something good can arise from its innovations — even if the results are very different from its current form or its numerous competitors,” wrote Shiller. “What I have in mind isn't another wave of price speculation. Instead, I believe that electronic forms of money could give us better pricing, contracting and risk management.”
The rise of bitcoin, says Shiller, is a perfect illustration of a speculative bubble: a “fad, a mania” of a certain asset that its holders expect to appreciate in value. However, the digital currency doesn’t solve any basic economic matters, says Shiller.
“Bitcoin has been focused on the wrong classical functions of money, as a medium of exchange and a store of value,” stated Shiller. Traditional forms of money, such as government-issued fiat currency, works fine for those aspects, but a new unit of account is needed more and should be developed by “business people.”
Shiller isn’t the only individual in academics or in business to lambast bitcoin and other cryptocurrencies. Over the past few months, there have been an array of world-renowned experts that have criticized bitcoin, such as Berkshire Hathaway’s Warren Buffett and Charlie Munger, Treasury Secretary Jack Lew, JPMorgan Chase CEO Jamie Dimon, CNBC’s Larry Kudlow and many others.