In an interview with CNBC’s Squawk Box this week, former Federal Reserve Chair Ben Bernanke dished out some heavy crypto criticism, opining that “they were intended to be a substitute for fiat money and in that respect, they have not succeeded.”
The American economist added that crypto’s appeal lies with the fact that it’s “successful as a speculative asset,” but with recent price crashes likely to result in seven consecutive weeks of decline, Bernanke says we’re “seeing the downside of that right now.”
“If Bitcoin were a substitute for fiat money, you could use Bitcoin to go buy your groceries,” he said. “Nobody buys groceries with Bitcoin because it’s too expensive and too inconvenient to do that.”
Comparing Bitcoin’s uses to gold, Bernanke said “you can use [gold] to fill cavities. The underlying [value] of a Bitcoin is to do ransomware.”
"I don't think that #Bitcoin is going to take over as an alternative form of money," says @BenBernanke. pic.twitter.com/yl9gs6VZKX
— Squawk Box (@SquawkCNBC) May 16, 2022
The former central bank chair also highlighted the growing risk of state clampdowns: “One of the other risks that Bitcoin has is that it could be subject to a lot more regulation, and anonymity is also at risk, I think.”
Despite these comments, nearly ten years ago, when Bernanke was chair of the Fed, he saw crypto’s early potential.
In a letter to Congress, published by Quartz, Bernanke said crypto “may hold long-term promise, particularly if the innovations promote a faster, more secure and more efficient payment system.”
Bitcoin: gold or tech stocks?
One of Bitcoin’s most popular narratives, pushed hard by so-called Bitcoin maximalists, is that the leading cryptocurrency offers a store of value, akin to digital gold.
This view has been widely held, at some time or other, by some of Bitcoin’s most famous advocates, including Mark Cuban, Elon Musk, and Bitcoin-HODLing MicroStrategy CEO Michael Saylor.
However, reporting from Arcane Research last month indicates that Bitcoin’s 30-day correlation with the NASDAQ has reached its highest point since summer 2020, while the cryptocurrency’s correlation with gold has nearly hit an all-time low.
Unless crypto developers can research and promote ways to fill cavities with crypto, the maxis will have to try and win us with different arguments.