Crypto Depends Too Much on ‘Bigger Stupid Theory’ to Be a Desirable Investment – Featured Bitcoin News

Former Federal Reserve Chairman Alan Greenspan says cryptocurrency is “too dependent on a ‘greater stupid theory’ to be a desirable investment”. However, he noted that the collapse of cryptocurrency exchange FTX was “purely a scam” and not the result of an inherent feature of the cryptocurrency. He doesn’t expect the FTX contagion to spread far beyond cryptocurrency.

Alan Greenspan on Crypto, FTX and the US Economy

Former Federal Reserve Chairman Alan Greenspan shared his thoughts on cryptocurrency, collapsed cryptocurrency exchange FTX and the US economy in a year-end Q&A published by Advisors Capital Management this week.

Greenspan served five terms as chairman of the Federal Reserve Board from 1987 to 2006. He was appointed chairman by four different US presidents. He joined Advisors Capital Management in September 2016 as an Economic Advisor to the asset management firm.

The former Fed chairman was asked to comment on the collapse of the Fed and his expectation of contagion. “I don’t expect the fallout from FTX to spread beyond crypto/NFT [non-fungible token] space,” Greenspan responded, referring to “the information that has come to light so far.” He emphasized:

The collapse of FTX was not the result of lax risk management, inadequate accounting procedures, or some peculiarity inherent in cryptocurrency – it was sheer fraud.

“Fortunately, while FTX and firms like it have increased marketing of their products in recent years, the lack of any significant widespread market reaction to FTX suggests that they are still concentrated in the hands of a relatively small minority of investors,” Greenspan said. .

“Furthermore, the differences we observed in the outcomes of the bursting of the tech bubble and the bursting of the housing bubble clearly showed that credit-driven asset bubbles produce more contagion when they eventually deflate,” he said. “There doesn’t seem to be significant leverage allocated to the crypto/NFT space right now, so I don’t expect the contagion to spread too far from this particular asset class.”

The former Federal Reserve chief added:

As far as the broader crypto universe is concerned, I see the asset class as too dependent on a “greater stupid theory” to be a desirable investment.

Greenspan also shared his views on the US economy and the Federal Reserve’s fight against inflation. On whether a recession is required to bring down inflation, as some economists have suggested, he said:

Recession seems the most likely outcome at this point.

However, he does not believe a “Fed reversal significant enough to avoid at least a mild recession” is warranted. “The slowdown in inflation still needs to be moderated to be temporary, with rising wages and extended employment.” So we may have a brief lull on the inflation front, but I think it will be too little too late,” Greenspan concluded.

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Do you agree with former Fed Chairman Alan Greenspan’s views on cryptocurrency and the US economy? Let us know in the comment section below.

Kevin Helms

Kevin, an Austrian Economics student, discovered Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open source systems, network effects, and the intersection of economics and cryptography.

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