The crypto community loves it when someone influential says anything positive about cryptocurrencies. Earlier today, the crypto community was buzzing as Nobel economics prize winner Robert Shiller described bitcoin as a “remarkable social phenomenon”.
Shiller, interestingly, didn’t take the same approach as other analysts. He didn’t start talking about the importance of risk analysis, nor did he warn investors of the dangers of getting involved with bitcoin. We’ve heard all of this before in previous interviews, and it’s getting old.
Instead, Shiller, in an interview with Bloomberg Television, talked about how he sees a geographic divide in the United States between bitcoin detractors and supporters:
“The East Coast is less into it than the West Coast,” explained Shiller in his Tuesday morning interview with Bloomberg Television. “Silicon Valley is really into it. This to me shows that this is not a rational response to new information.”
Bitcoin dipped to a 2018 low this past weekend, falling as far as $5,800. On Monday, the price rebounded above $6,200, which is where it’s mostly stayed as of Tuesday. However, the price of bitcoin is still significantly lower than it’s all time high above $19,700 reached in December 2017.
Despite the fluctuating volatility, Shiller claims it doesn’t mean bitcoin will ever go to zero. We’ve seen plenty of bubbles in the modern economy, and in many cases, the price of the asset – whether it’s the price of a home in the United States or the cost of Microsoft stock – bounces back.
“It’s a social movement,” explained Shiller. “It’s an epidemic of enthusiasm. It is a speculative bubble. That doesn’t mean that it will go to zero.”
Shiller is a professor of economics at Yale University. The 72-year old American Nobel Laureate, economist, and bestselling author was vice president of the American Economic Association in 2005 and president of the Eastern Economic Association in 2006-2007. He specializes in behavioral economics and New Keynesian economic theory. In 2013, Shiller jointly received the Nobel Memorial Prize in Economic Sciences with Eugene Fama and Lars Peter Hansen. The trio received the Nobel Prize “for their empirical analysis of asset prices”. So clearly, Shiller has some relevant background when assessing the value of bitcoin.
During the latest interview, Shiller was also asked about a comparison between bitcoin and the 17th century tulip bubble in the Netherlands, when prices of the flowers skyrocketed across the country. The incident is frequently cited as the first major bubble in the modern economy, and many people link the Dutch tulip crisis to the rise of bitcoin.
“Tulips are still valued,” explained Shiller in response. “There are some expensive tulips.”
Fair point. You can view the full interview with Bloomberg Television here.