(Benzinga) - Prominent economist Nouriel Roubini has expressed his skepticism on the developments pertaining to the FTX saga questioning the bailouts in the cryptocurrency industry.
“First FTX bails out collapsing crypto Ponzi scams. Now FTX is collapsing & being bailed out by Binance. But who will bail out Binance when that crappy house of cards collapses? Crypto is Mother Of All Ponzi Schemes! Binance set to rescue crypto rival FTX,” Roubini tweeted.
Binance signed a non-binding agreement on Tuesday to buy FTX's non-U.S. unit to help tide over a liquidity crunch at the rival exchange. The overall cryptocurrency market capitalization dropped on Tuesday on the heels of Binance selling its position in FTX token FTT/USD-13.7%+ Free Alerts. The price of FTT dropped significantly and pulled down top cryptocurrencies like Bitcoin BTC/USD-4.90%+ Free Alert and Ethereum ETH/USD-8.25%+ Free Alerts.
Misnomer: Talking about the asset in an earlier interview, Roubini had observed that it is a misnomer to call them cryptocurrencies as "they are not currencies by any reasonable definition."
“When you look at the pricing of these cryptocurrencies, they look like typical bubbles. You have exponential increases in the value of the assets totally unrelated to the underlying fundamental value. Bitcoin’s own inflation in the three years before its peak was much worse than the Tulipmania or the South Sea Bubble or the Mississippi Bubble,” he had explained.
Roubini cited the example of Isaac Newton who made a significant loss in the stock market.
“Isaac Newton lost his shirt by investing late in the South Sea Bubble — just to give you an example showing that even very, very smart people can be taken by the frenzy and the mania of asset prices rising because everybody else is buying. And here we are talking about people not nearly as sophisticated as Newton,” he had told Octavian Report.
By Bhavik Nair, Benzinga Staff Writer
November 9, 2022
