Interview with Laeticia Strauch-Bonart in L’Express (French magazine), translated.

Last year, 2022 was not of much respite for cryptocurrencies. While bitcoin has lost more than 60% of its value, the entire sector is in crisis, punctuated by various bankruptcies such as those of Terra and FTX. The phenomenon is the consequence, according to scholar and former trader Nassim Nicholas Taleb, of the low-interest rate “Disneyland” economy in which we have been living for fifteen years. A “cluster” was formed: Pro-putin, climate and Covid deniers, carnivores, and crypto culties, that Taleb, a former crypto hopeful but a fierce opponent since 2021, has decided to attack head-on.

L’Express: As early as 2021, you warned about the inability of bitcoin to play the role of a real currency. Prophetic remarks…

Nassim Nicholas Taleb: My point in the article I published in 2021 nicknamed “the bitcoin black paper” was that in its current version, despite the hype around it, bitcoin had not managed to satisfy the notion of “currency without government” and that it even turned out to be not a currency at all. It is because it can be neither a short-term nor long-term store of value, cannot function as a reliable cover against inflation and, worse than anything, it does not remotely constitute a shield against government tyranny or a vehicle to protect against catastrophic episodes.

The comparison with gold is quite poor. It cannot be expected that an entry on a register that requires active maintenance by interested and motivated people — this is how bitcoin works — will retain its physical properties, a condition for monetary value, for any period of time. In addition, we are not sure of the interests, mentalities and preferences of future generations. Technology comes and goes, gold stays, at least physically. Once neglected for a brief period, bitcoin would necessarily collapse [The “absorbing barrier”].

The fundamental defect and contradiction at the base of most cryptocurrencies is that initiators, miners and maintainers of the system were making money from the inflation of their currencies rather than the simple volume of the underlying transactions. Thus, the total failure of bitcoin to become a currency has been masked by the inflation of its value, generating profits (on paper) for a sufficiently large number of people. In reality, bitcoin has maintained extremely high volatility throughout its existence and, even worse, at higher prices, which makes its capitalization considerably more volatile.

Let’s add that Bitcoin transactions are considerably more visible than others, which makes it uninteresting for intelligent fraudsters!

Where does the craze for cryptocurrencies come from?

What we have been experiencing for fifteen years is a kind of Disneyland, with near zero, sometimes negative, interest rates and therefore without real market functioning. Lowering rates creates asset bubbles without necessarily helping the economy. Capital no longer costs anything, risk-free returns on investment become too low, even negative, pushing people into speculation. We lose our sense of what a long-term investment is. It is the end of real finance.

Investors get pushed into a Ponzi-like strategies: to invest in the assets of companies whose price was rising. Thus, the majority of technology companies do not produce cash flow but are financed through “funding” which inflates their assets on paper. Another phenomenon, in the past fifteen years, hedge funds that should not normally exist have grown like mushrooms. And then you have malignant tumors like bitcoin.

At first, when cryptos appeared, you seemed rather favorable

At the time, I was very critical of the Fed’s policy. I have always been critical of Ben Bernanke, who in my opinion did not see the structural risks of the system before the 2008 crisis, and overreacted afterwards. Instead of correcting debt and mitigating hidden risks, he covered them with a monetary policy that was only supposed to be transitory. I wrongly thought bitcoin would be a bulwark against the distortions of this monetary policy. By flooding the money market, central banks have created these tumors. Central banks have an advantage: they ultimately show a certain accountability, which is not the case with cryptos.

I think the crypto universe attracts manipulators and scammers. It also has a generational vice: it is filled with young people who have no experience, who bought bitcoin early and who got temporarily rich without knowing anything