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Bitcoin (BTC) Just Another Bubble: IFF Economist

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Wed, 15/03/2023 - 7:56
Bitcoin (BTC) Just Another Bubble: IFF Economist
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Robin Brooks, an economist at the Institute of International Finance (IFF), has suggested that digital asset Bitcoin is "just another bubble asset."

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In a tweet posted on March 14, Brooks stated that Bitcoin has "zero store of value function," "zero diversification benefit," and "zero yields" and that it "blows up" when the Federal Reserve gets serious about hiking interest rates.

Brooks' tweet comes at a time when Bitcoin recently crossed the highly coveted $26,000 mark, reaching a year-to-date high and sending crypto bulls into a frenzy.

However, his comments suggest that Bitcoin's recent price spike is not reflective of its true value or potential.

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Fellow economist Tim Kehoe commented on Brooks' tweet about Bitcoin being a bubble asset. Kehoe agrees with Brooks that low interest rates can promote investment in assets with high risks, such as the flagship cryptocurrency. This is why he is thinking about asset bubbles in overlapping models with zero interest rates or their growth equivalents.

That said, he wants to further explore the link between low interest rates and investment in high-risk assets by collecting more data.

Bitcoin's viability as a stand-alone asset class has long been a highly controversial topic in the world of finance.

Crypto advocates see the flagship cryptocurrency as a legitimate investment and store of value. However, its naysayers argue that it is a speculative bubble that will inevitably burst.

Brooks' recent comments, as expected, ruffled the feathers of many cryptocurrency enthusiasts who were quick to dismiss his criticism in the comments.

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