Economist: Buying Bitcoin is "gambling," and Wall Street control its price

07 Jul, 2019 | Updated: 07 Jul, 2019
by Will Heasman
Opinion
Economist: Buying Bitcoin is gambling, and Wall Street control its price

Despite it’s growing leagues of supporters Bitcoin still isn’t everyone’s cup of tea, in fact, some people continue to think it’s a downright Ponzi scheme, an egregious scam, or, as Charlie Munger famously put it – the equivalent of “trading freshly harvested baby brains…” Now a famed economist has offered his own opinion up, equating buying Bitcoin to “gambling”, and suggesting that Wall Street has some part to play in controlling its price…

The economist in question is Andy Xie, the very same who predicted the 1997 Asian financial crisis, which threatened to spread to the rest of the world’s economy. Speaking to The Korea Times, Xie opined that despite growing recognition of Bitcoin (BTC) and other cryptocurrencies, these assets would never be assigned as a ‘legal currency,’ due to their volatile nature, adding that BTC was “gambling instrument.”

No replacement for fiat

"Bitcoin is primarily a gambling instrument for Chinese, Koreans and Japanese," said Xie.

"Even though so many argue it could be used to replace the fiat currency, its huge volatility makes it impossible."

Xie, a former Morgan Stanley economist, elaborated on his disdain for cryptocurrencies, noting specifically why he believes they will never replace fiat:

"Cryptocurrency will never be recognized as legal currency because the governments cannot issue bonds in that. Its volatility could bankrupt such a government.”

Libra legitimacy?

However, Xie’s criticisms come at a time where everyone seems to be joining the crypto revolution from JP Morgan with it’s creatively named JPM Coin to Facebook’s Libra Coin, these major firms have essentially acknowledged Bitcoin and other cryptocurrencies as the next logical step in finance by attempting to usurp the spotlight for themselves.

Interestingly, Xie too holds this opinion, suggesting that the emergence of Libra will actually bolster belief in the cryptocurrency industry:

"Facebook's Libra should be bad for bitcoin, because its launch will increase supply of a substitute. But its psychological effect is to remind people that it is becoming more legitimate. Hence, people go back in," he said. 

Wall Street in control

Regardless, Xie suggests that Bitcoin will never again reach the all-time highs of December 2017, mainly because Wall Street wouldn’t allow it to…

"Wall Street has set up a futures market in Chicago. The traders there could push it back when it is that high. They would push it down until the people in East Asia panic and run. Then they will square position to cash out.

They are essentially making money from East Asia. They will make it in such a way to keep the game going. East Asians lose about $100 billion in gambling every year," he said. 

Is Xie right, does Wall Street control Bitcoin to some extent? Let us know your thoughts in the comments below!

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