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“A lot of people are going to get hurt” as Bitcoin hits record high, top economist warns
Bitcoin is in tears, exceeding $70,000 on Friday, a new record for the largest cryptocurrency in the world. Even though Bitcoin has seen more widespread adoption, some skeptics remain. Dr. Burton Malkiel, American economist and author of “A Random Walk Down Wall Street,” joined TheStreet to discuss what he thinks about the crypto craze.
Full video transcript below:
SARA SILVERSTEIN: And is there any investment advice you hear now or never? Is this just one of your pet peeves that’s driving you crazy?
DR. BURTON MALIKEL:
Well, now I’m going to give you an example where people are investing money in what is a speculative asset class and where I think a lot of people are at risk of getting hurt, and that’s Bitcoin.
And the problem, I think, is that in some sense, Bitcoin is a terrible currency to use. Why would I want to go buy my cup of Starbucks coffee with a currency that increases by $2,000 or decreases by $2,000 in a single day and I have no idea how many Bitcoins I’m going to have to use to buy my cup of coffee. In some sense, it is so volatile that it is not really a useful currency. And the problem is that this is useful for certain purposes.
If I wanted to trade drugs, I think I would be absolutely happy to use Bitcoin where my purchases and sales would not be known to my credit card company or banker, or if I had gotten into a company’s computer system and basically, I had programmed it so that it wouldn’t work anymore. And I insisted on being paid a huge sum to unclog their computer system. If, in other words, it was ransomware, if I was in the ransomware business, I think Bitcoin would be a great currency to use.
So there are uses and ultimately I think this will cause Bitcoin to fall because governments won’t allow this to continue to happen. So I think Bitcoin carries a huge risk. People say Bitcoin will be fine because there is a limited amount, there is no limited amount of cryptocurrency.
There are many other cryptocurrencies and there will be many more in the future. I am not against technology. There will be government cryptocurrencies, but I think a lot of people are ultimately going to be very affected by Bitcoin, which is now at a new high. And I can assure you that if this reaches a new high, you will attract people in the FOMO crowd. I can’t miss this and I’m afraid a lot of people will get hurt. So if I had something to suggest that I really care about and that I think is actually the most bubbly out there, that’s the area I would choose. I have no idea where Bitcoin is going. Could it reach $100,000? Absolutely, could it go up to 200,000? Absolutely. But what I’m sure of is that a lot of people think they know exactly what it’s going to do, and I’m afraid a lot of people will get hurt.