Willem H. Buiter in Project Syndicate:
In addition to undergoing wild price swings on a regular basis, Bitcoin and other cryptocurrencies are also consuming massive amounts of energy, enabling criminal activity, and creating new financial risks. Their booming yet unfathomable popularity demands an urgent regulatory response.
The price of Bitcoin has undergone yet another wild gyration, rising from $41,030 on September 29, 2021, to $69,000 on November 10, 2021, before falling back to $35,075 on January 23. That is its second-largest decline in absolute value, though it has suffered larger declines in percentage terms, such as between December 15, 2017, and December 14, 2018, when it fell by 83.8%. More broadly, the cryptocurrency market (comprising some 12,278 coins) was estimated to be worth $3.3 trillion on November 8, 2021, before plummeting to $1.75 trillion as of January 30.
A private digital asset based on a distributed ledger technology known as “blockchain,” Bitcoin is used as a decentralized digital currency – a peer-to-peer electronic cash system. With no intrinsic value, its market valuation (in terms of US dollars) is nothing more than a bubble.