Calling Bitcoin the 'biggest bubble in human history', economist Nouriel Roubini predicts that the virtual currency will crash to zero value.
Roubini, also known as 'Dr Doom' for accurately predicting the 2008 financial crisis two years before, warned that some people would use a market manipulation tactic known as wash trading to prop up the price.
Wash trading in the crypto world involves someone buying and selling their own order to manipulate markets.
A professor of economics at Stern School, part of the New York University, Roubini has been sceptical about Bitcoin since its inception, calling it a "gigantic speculative bubble."
Roubini took to Twitter on Tuesday to warn investors to "HODL" or "hold on for dear life" - a phrase popular in online forums after someone spelt 'hold' wrong. It is often used for people holding rather than selling in the cryptocurrency market during times of extreme volatility.
"As expected bitcoin now crashes below $6000. Now the $5K handle is reached. And the US Congressional Hearing on Crypto-Scams is still a day away. HODL nuts will hold their melting Bitcoins all the way down to ZERO while scammers and whales dump and run," the tweet said.
Roubini was referencing a Congressional hearing that will see Christopher Giancarlo, chairman of the Commodity Futures Trading Commission, and Jay Clayton, chairman of the Securities and Exchange Commission, testify in front of lawmakers about cryptocurrencies.
Roubini said that "HODL nuts" will hold Bitcoin until it plummets to zero.
Created in 2007 by a group of developers led by famed pseudonym 'Satoshi Nakomoto,' the value of Bitcoin rallied 1,300 per cent to $19,343 in 2017 from an initial price of $0.001 set in January 2009.
Foreseeing the risk, in the UAE, the Securities and Commodities Authority has raised the alarm about all digital, token-based fundraising activities or investment schemes, whether referred to as initial coin offerings, ICOs, initial token offerings, token presale, or token crowdsale.
The SCA urged investors to be fully aware of the risks associated with ICO investments. It reiterated that it does not recognise, regulate, or supervise any ICO presently and that ICO investments are not offered legal or regulatory protection. It went on to say that investors involved in ICO investments are doing so at their own risk.
Several other countries had taken a similar stand. At the recent India budget presentation, Finance Minister Arun Jaitley said the government did not consider cryptocurrencies as legal tender or coin and would take all measures to eliminate their use in financing illegitimate activities,
In the US, regulators are expected to ask Congress to pass legislation to improve oversight of virtual currencies like Bitcoin amid concerns about the risks posed by the emerging asset class.
Goldman Sachs Group's global head of investment research Steve Strongin said Bitcoin tumble could get a lot worse.
"Most digital currencies are unlikely to survive in their current form, and investors should prepare for coins to lose all their value as they're replaced by a small set of future competitors," Strongin said.
"The high correlation between the different cryptocurrencies worries me. Because of the lack of intrinsic value, the currencies that don't survive will most likely trade to zero," he added.
However, Strongin was more upbeat about the blockchain technology that underlies digital currencies, saying it could help improve financial ledgers. But even there he sounded a note of caution, arguing that current technology doesn't yet offer the speed required for market transactions.
"I don't like to comment much on market exchange rates, but Bitcoin is up 646 per cent from 365 days ago, and billions of dollars per day are securely transferred around the world each and every day without a glitch - just for elementary clarity to frame the conversation regarding the infamous "crypto is dead" after each-and-every market correction," said Niko Younts.
- 5 Best Bitcoin And Cryptocurrency Wallets In 2018: Techradar's Guide
- 6 Cryptocurrencies That Could Become The Next Bitcoin
"If you study the history of this emerging eco-system the [sometimes extremely dramatic] fluctuation in price and occasional bad actors or startup security breaches are somewhat commonplace, but more as an exception and not the norm," said Younts.
"The key to be a successful investor is 'buy low and sell high.' The problem with people chasing investments which are already hot is that they will end up buying high and selling low. Instead customers should not panic, they should hold their investment and buy BTC, when it is low and continue investing in ICO based on a concrete business model," said Ali Kassab, chairman of Centurion & Co.
Deepak Machado, a Blockchain/Bitcoin evangelist, said volatility is the biggest challenge as far as "I see it".
"Unless the prices are stable, it may be hard to pursue people to use or spend Bitcoin. Adoption into day to day life will still be challenging given the volatility. Why would you transact in a currency that will go up in value the day after? You won't, right? I believe volatility would stabilise at around $ 100 k per bitcoin," said Machado.
By Issac John
Copyright © 2021 Khaleej Times. All Rights Reserved.