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Bitcoin, Currencies, and Fragility

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Bitcoin, Currencies, and Fragility

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Bitcoin and other cryptocurrencies are not a panacea, as proponents claim.


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In 2007, shortly before the Great Recession, trader, author and philosopher Nassim Nicholas Taleb published his acclaimed book The Black Swan. The title was a metaphor for the rare and unforeseen event capable of producing extraordinary damage. Now Taleb brings his thought leadership to the sphere of cryptocurrencies. He makes a persuasive case that bitcoin, with its risk and volatility, is neither reliable nor viable as a store of value or an investment instrument. Investors, technologists and cryptoenthusiasts will find compelling food for thought in this insightful report.

Summary

The technology behind bitcoin does not assign bitcoin’s value as a currency or an asset.

Advocates of bitcoin consider it a store of value, a hedge against inflation, and a serviceable currency and payment mechanism. However, critics point to the cryptocurrency as speculative and volatile, carrying enormous risk for traders and investors. The appeal of bitcoin emanates from its immutable record and the distributed ledger; however, this trust architecture, based on technology, does not assign a monetary value to bitcoin.

Investors in bitcoin have no stake in any future earnings or dividends, as they...

About the Author

Nassim Nicholas Taleb is a professor of risk engineering at New York University, an adviser at Universa Investments and a best-selling author.


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