The price of bitcoin is ‘manipulation driven’: Nouriel Roubini

Nouriel Roubini, professor of economics at New York University’s Stern School of Business and CEO of Roubini Macro Associates joined Yahoo Finance to discuss his thoughts on bitcoin.

Video Transcript

JULIA LA ROCHE: Welcome back to Yahoo Finance Live. Nouriel Roubini, NYU professor of economics at Stern NYU joins us now. Nouriel, always great to get you on.

We would like to share some breaking news that has just been encountered. We get some headlines that President Trump has challenged Congress and vetoed the bipartisan defense policy bill. In some comments, Trump called the defense policy bill a, quote, gift to China and Russia.

And, of course, I know you’re someone who looks at geopolitical events. And we are preparing for a new administration in 2021. Your response to this intersecting news only.

NOURIEL ROUBINI: Well, you know, I mean the president gets uncompromising on everything. He is literally trying to make a military coup, following the advice of Mike Flynn and others, in order to overturn the election results.

He does not want to pass the stimulus bill. And if it doesn’t, we might shut down the government. And now, he’s accusing the defense bill of things that don’t make any sense, you know. He has even denied that this major hack attack came from Russia. She claims to have come from China with no foundation. And if there’s anything that can really help us push back against our strategic rivals, be it Russia or China or North Korea or Iran, it’s this defense bill.

So, literally, the guy is going completely insane overall. It’s just politics. Maybe he’s trying to get himself ready to run again in 2024. Maybe he’s losing his marbles. I don’t know what’s going on. But just about everything it does, it makes no sense.


JULIA LA ROCHE: Nouriel– go on, Adam. You are going ahead.

ADAM SHAPIRO: Go Julia. All you are, Julia.

JULIA LA ROCHE: Well, I’d like to move the conversation, and thank you so much for sharing your thoughts on that, to cryptocurrency. Of course, Bitcoin. I think the last time we got you on, you got a lot of attention.

I’m looking at the price of Bitcoin now. It’s above $ 23,500. And you tweeted out that Bitcoin has no place in the portfolio of an institutional investor or a retail investor. And yet we continue to see big-name institutional investors flood the space. Paul Tudor Jones, for example. Even Anthony Scaramucci. And then, we also see the retail investors. Why doesn’t it deserve a portfolio place?

NOURIEL ROUBINI: First of all, calling it a currency is not a currency. It is not a unit of account. It is not a means of payment. He is not single [? numerator. ?] It is not a fixed store of value.

Secondly, it’s not even an asset. An asset either has income, consumption and capital gains, such as bonds, like stocks, such as real estate. Or as with precious metals, they don’t give you an income. But gold gives you industrial use, it gives you [INAUDIBLE] as jewelery, and as capital gains. While in the case of Bitcoin, there is no income, no use, no usefulness.

The only thing is a self-fulfilling speculative rise of uplift. And that uplift is completely driven by manipulation. There has been an academic study that suggests that this pseudo-fixed coin Tether was created by fiat. This year alone, the increase in supply from Tether has been another $ 16 billion out of the initial 4.. So, it’s 20. And every time the price of Bitcoin goes down, literally overnight they announce more of this Tether which is literally used to manipulate the price of Bitcoin.

So, the price of Bitcoin is completely manipulated by a bunch of people, by a bunch of whales. It has no fundamental value. And as in 2017, when it went from 1,000 to twice that, and then in ’18 it dropped from 20,000 down to 3,000, I think we’re close to the point that this hyperbolic bubble is going to going into the wall. And it’s going to go bust because law enforcement authorities are conducting an investigation into Tether and the company behind it.

And in my opinion, as in the case of BitMex which was the biggest scam and criminal derivative cryptocurrency house is being shown, you can get an indictment of those behind Tether. When that happens in the next few months, there will be a crash of Bitcoin and all the other cryptocurrencies. They are not even a currency. They are pieces of shit.

ADAM SHAPIRO: Nuriel, I want to decompose this into several parts. Because I think many investors with Bitcoin at over $ 23,500 today need to pay attention. Why would it be, I’ll call it an infection, if the feds crack down on that other crypto, to Bitcoin? And how do you look at the fact that central banks around the world are looking at creating digital currencies? Are they different than what we’re seeing with the Bitcoins and the other cryptocurrency is already available?

NOURIEL ROUBINI: Well, there are several academic studies, including one by the University of Texas, that showed that this Tether is issued every time Bitcoin prices weaken. There is literally a fixed coin created out of Fiat. There has been no update that these cryptocurrencies are supported by any assets. And it has just been printed by a fiat used to buy Bitcoin. So, it’s really a total price manipulation.

There is ample evidence that there are other plans for handling cryptocurrency. There are pumping and dumping plans, hundreds of channels on Telegram or on leading WhatsApp, that is washer trading. Anything that is done for a penny stock is done for crypto and Bitcoin into force 10. That is a completely manipulated market. It is not driven by fundamentals. Insiders who drive it, by criminals, by whales, by scammers. That is the reality and there is evidence on it. And that’s why criminal investigations are going to peak in the next few months.

Second, central banks are going to introduce digital currencies. But, first and foremost, this digital currency will have nothing to do with crypto or blockchain. Today, every private commercial bank has a bank account with the Fed. We, as individuals [? non-corporational ?] non-financial. We do not have access to the Fed’s balance sheet.

Suppose we have tomorrow’s access to the Fed’s balance sheet. That’s what central bank digital currency means. It’s not digital money. Digital currencies have already existed for decades. We have bank accounts, we have wire transfers, we have AliPay, we have WeChat Pay, we have Venmo. We have all sorts of other digital payment systems.

So what’s new is that it’s not going to be digital. There are thousands of digital payment systems that work around the world. The reason is that we don’t have a situation where individuals like you and I have access to the Fed’s balance sheet. Once we have done that, we do not need to get a bank deposit for making cheap, fast, instant transactions that are immediately cleared and settled by our payment system. So once we have a central bank digital currency, not just crypto– this junk, these shit coins that have no payment use. But even other digital payment systems like bank deposit or Venmo and PayPal will be dominated by central bank digital currencies. And this technologically advanced plan has nothing to do with crypto, it has nothing to do with blockchain. It’s going to be centralized. He is going to get permission. It will be a private system, not a decentralized public ledger.

So calling it crypto is not true. It is a central bank digital currency. It’s going to revolutionize payment systems and it’s going to destroy any non-cryptocurrency and non-crypto-cryptocurrency.

People do not know what they are talking about when they talk about central bank digital currency. They get excited. They say even central banks are going to crypto. Just the opposite. They don’t know what they are talking about.

JULIA LA ROCHE: Nouriel Roubini, professor of economics at Stern NYU and CEO of Roubini Macro Associates. Always a pleasure to have you on. Wishing you a happy holiday season. And thanks, again.