If you’ve talked with people around you about Bitcoin and its future, the word ‘bubble’ must have appeared several times. If the bubble does burst eventually, its value will collapse. Having almost the same view, Nobel laureate Robert Shiller believes that the most traded cryptocurrency worldwise will gradually collapse or limp on as its worth deteriorates. He further resorted to the standard comparison of Bitcoin or cryptocurrency with the tulip mania. Up till now, statements and beliefs like these haven’t been proven right.
It’s also not the first time when someone pointed out that Bitcoin has no inherent value or backing asset. But apart from this, Robert Shiller also claimed that the value it holds is due to the prevailing consensus. This, however, is true for all cryptocurrencies and not just Bitcoin in particular. Consensus driven value is the fundamental behind such digital financial assets traded over a distributed ledger. In fact, fiat and digital money also derive value from a consensus that these pieces of paper or coins are legal tenders.
Shiller also shared his views on the value of gold being different had people not seen it as an investment. Originally, gold had worth and utility across several areas. From allowing miners to pay rent, buy alcohol, and other luxuries to molding it into jewelry- all was and is still possible today. So, gold primarily serves today as a store of value, and he believes that Bitcoin might head in the same direction.
However, comparing Bitcoin to tulip mania is not necessarily valid. The tulip mania was a bubble, but it was never a mode of payment or aimed to emerge as one. It was a product whose value inflated over time given its demand and then eventually the bubble burst. Further, the supply of tulips was deliberately controlled by its producers to push such inflation, while Bitcoin has always had a fixed supply, which no one can do anything about. And as a financial asset, Bitcoin will have its ups and downs through the journey.
Ultimately, Shiller believes that Bitcoin might collapse any time soon. But then, he acknowledged that it could also stick around for another hundred years. Such a conflicted view about Bitcoin can depict a lack of understanding or awareness about how and what Bitcoin does. Shiller has previously called Bitcoin a ‘fad,’ regardless of which its value only continued to explode. Crypto enthusiasts are relying more on the market statistics and expert opinions than what other industry veterans are saying, given the lack of knowledge.
