Updated 06 May, 2021

“Black Swan” Author Taleb Calls Bitcoin an “Open Ponzi”

“Black Swan” Author Taleb Calls Bitcoin an “Open Ponzi”

Key Takeaways:

  • Nassim Taleb slams Bitcoin as “gimmick” in a recent interview
  • The author argues there is no connection between Bitcoin and inflation

Characteristics of Ponzi Scheme, says Nassim Taleb

Nassim Taleb is the famous author of best-selling books on finance and economy, including “Black Swan” and “Skin in the Game”. He took a hard line on Bitcoin in a recent TV interview. Speaking to CNBC, the statistician and writer likened Bitcoin to an “open Ponzi” and “gimmick”. Mr. Taleb doubled down on his Bitcoin skepticism. He said there is no link between Bitcoin and the attributed characteristic of a hedge against inflation.

“It has characteristics of an open Ponzi scheme. Everyone knows it’s a Ponzi,” Nassim Taleb said on CNBC’s Squawk Box. “There is no connection between inflation and Bitcoin,” he argued.

“These gimmicks, of course. You have Bitcoin today, you may have another one tomorrow. They come and go, and there’s no systematic link between them and the claims they make,” Mr. Taleb continued. “If you want a hedge against inflation, buy a piece of land, grow—I don’t know—olives on it. You’ll have olive oil if the price collapses. With Bitcoin, there’s no connection.”

How is Bitcoin performing?

Inflation pressures have been causing stock market jitters this year and have had traditional investors worried over the lofty valuations of the equity market, particularly in high-tech stocks such as Apple, Tesla, Microsoft, and other large-cap companies in the tech sector. There is little proof that Bitcoin will meet its characteristics of a “hedge against inflation”, a line, popular among the Bitcoin faithful.

Judging by Bitcoin’s recent performance relative to the US stock market, a year ago when the wheels came off the market, Bitcoin’s price dropped, too. Throughout 2020, Bitcoin’s correlation to traditional financial markets began to rise and its price has become increasingly tied to movements in stocks.

Inflation concerns this year have been primarily linked to the bountiful government spending and the risk of creating hyperinflation due to the printing of trillions of dollars injected in the US economy. Inflation, however, has so far remained under control. The Federal Reserve, responsible for keeping stable prices, has reiterated multiple times this year it does not see inflation rising more than 2.4%, which is moderately above the central bank’s target of 2%.