UpdatesJan 20, 2023

99% of cryptocurrencies are pyramid schemes that will fail, warns Nouriel Roubini

A well-known American economist again criticizes digital currencies.

Bitcoin has increased by almost 40 percent in the last two months, thus making up for the losses incurred due to the collapse of the FTX exchange. This increase contributed to a significant increase in optimism among investors in the cryptocurrency market. However, this belief is not shared by Nouriel Roubini. An economist known for his skeptical approach to digital currencies believes that 99 percent of these assets are "fraud".

99 percent of cryptocurrencies are a scam

Renowned economics professor Nouriel Roubini believes that the FTX exchange and its founder Sam Bankman-Fried (SBF) are no exceptions. In his opinion, this is the "rule".

“Literally 99 percent of cryptocurrencies are scams. Criminal activity. Totally real financial pyramids that will collapse – he admitted in an interview with Yahoo Finance Live during the World Economic Forum in Davos, Switzerland.

– Investors should stay away from cryptocurrencies, or at least approach entrepreneurs in this industry with a lot of distrust. The American also believes that most of these people should be locked up in prison. Literally, they are all scammers,” added Roubini, referring to people associated with the cryptocurrency industry.

FTX was worse than Bernie Madoff's pyramid scheme

And while Roubini likened the collapse of FTX to Bernie Madoff's Ponzi scheme, he noted that in that case, several thousand people "were victims of fraud" compared to the millions affected by FTX.

– FTX had a million customers in the US. However, there are 40 million people who have invested in cryptocurrencies, mostly young people or people with lower incomes. The vast majority of them – 99% of them – did not buy bitcoin for $1,000 or even $10,000. Most of them experienced FOMO in 2021 as the price of BTC skyrocketed from $20,000 to $30,000, then to $50,000 and finally to $69,000 per coin. 99% of these investors bought Bitcoin well above the current market value. So they've lost all their money, they're broke. It's a nightmare," the economist admitted.

Blockchain is a completely useless technology

As if that wasn't enough, Roubini expressed similar skepticism about blockchain technology itself, claiming that "in principle, you can't create trust with technology alone" without any verification by a trusted institution.

In his opinion, technology cannot create trust, because “in reality, in every case, some credible institution is necessary that approves the transaction. So most of what they actually call a blockchain is a blockchain in name only... so it's not a blockchain, it's a glorified database."

– So Google Docs is a permissioned database and everyone uses it. Nobody calls this solution a blockchain, because it is not a blockchain. So blockchain is just a fad and it's a completely useless technology, plus it wastes a lot of energy," concluded the American economist.