Russian Central Bank Reports Cryptocurrency “Fever” Is Waning
Cryptocurrency, Investing–Cryptocurrency has long been under attack for a number common faults found with the industry. Many economists, including Nobel Prize winning academics, focus on the viability of crypto as a source of money as an alternative to traditional fiat. While investors and pro-crypto enthusiasts see the advantage of digital money, transactions secured through blockchain and the ability to transact outside of a tender controled by centralized government authorities, economists continually point out the ways in which it fails to perform as a currency. Price volatility and the failure for deflationary currencies to perform over time have commonly been cited as major problems with crypto becoming a dominant source of money.
But equally controversial has been the claim that cryptocurrency is largely driven by bubblish fever, with most detractors pointing to “tulip mania” and the collapse of 2000 internet stock companies as being analogous to the current industry of cryptocurrency.
According to these critics, cryptocurrency largely constitutes a massive pyramid scheme, with early adopters being strongly incentivized to encourage more users to “adopt” the technology by buying into the currency. The model creates a feedback loop, where more investors buy in based off the appearance of overnight riches and amassed wealth through appreciation, thereby further incentivizing the system to find new customers. In the past, cryptocurrency investing has been likened to a global virus, where investors are referred to in terms of infected patients, obsessed with the daily price movements and frenzied in their passion for the technology and industry.
On October 18, the head of the Russian Central Bank joined this discourse by referring to the drive for cryptocurrency investing as a “crypto fever,” and one that seems to be gradually tapering off with the ongoing bearish cycle of 2018. Elvira Nabiullina said in a report published by Russian news agency RIA Novosti, while speaking at a finance innovation forum held in Sochi, that she finds that the fervor surrounding cryptocurrency and blockchain to be waning,
“Fortunately, the crypto fever has begun to diminish. Technologies such as blockchain have inspired great enthusiasm, but now, as far as we can see, the approach to them is more sober.”
Nabiullina’s statement comes with a degree of moderation for the industry. While not outright criticizing cryptocurrency for the at times feverish approach of the enthusiast base, she does take the side that the crypto investment community has been inundated with a fair amount of myopic trading and even more unsubstantiated claims.
Russia’s central bank went on to shed some praise for entrepreneurs and established businesses for finding ways to implement blockchain into their projects, as opposed to just using the technology as a buzzword to attract investors. She also had high praise for initial coin offerings–an interesting position that stands contrary to other ICO critics–stating that the novel crypto model for acquiring seed money is “a perfect method to raise funds.” However, she cautioned that while ICOs may provide a novel and useful model for raising money, particularly in the industry of cryptocurrency, the current lack of regulation for the industry creates the conditions for widespread and accessible fraud.