A prominent economist at the London School of Economics (LSE) says Bitcoin early-adopters turned crypto-aristocrats could harm the cryptocurrency space.
A New-Age Aristocracy
According to the director of the Systemic Risk Centre at the London School of Economics (LSE), Jon Danielsson, the cryptocurrency market is at risk of producing a “Bitcoin (BTC) aristocrat” class.
The wealthy members of that class will achieve their rank solely through the early-purchase of the market’s top-cryptocurrency, rather than producing anything of value, the economist continues.
Indeed, the aristocratic class pose a danger when they inevitably start spending their trillions, Danielsson adds.
“We do know that such extreme levels of inequality fuel social division and populism. The bitcoin aristocrats will come under increasing threat, and the government will have to respond. It will protect or attack; it can’t be neutral. Either way, political and social instabilities get worse.”Jon Danielsson – Director of the Systemic Risk Centre, LSE
In fact, soundings of an emerging “ennobled” group of hodlers have permeated the crypto-space for several years.
An infamous Reddit post entitled “I am a time-traveler from the future, here to beg you to stop what you are doing.”, describes a “Bitcoin Citadel” in which a wealthy BTC hodling elite do everything they can to protect their wealth.
Notably, the author, a “u/Luka_Magnotta”, wrote the post over seven years ago, describing a dystopia where BTC hit $1,000. Today, the top-cryptocurrency is over $43,000, hitting a high of $58,640.77.
An Expectation of ‘Success’
Danielsson also highlights several causes for Bitcoin’s premium today. One of his principal conclusions is that people are simply expecting the top-cryptocurrency to appreciate further.
This is the only thing, in his opinion, that explains the high valuation, with little, he thinks, regard to its actual use.
Moreover, he questions what “success” looks like for Bitcoin.
“The bitcoin enthusiasts are quite vague on what success means beyond rising prices, they seem more fond of arguments wrapped in mysticism than basic economic logic. The most important criterion for success is that cryptocurrencies end up being used in commercial transactions, like Tesla accepting bitcoin today.”Jon Danielsson – Director of the Systemic Risk Centre, LSE
Additionally, he examines a number of “value propositions” other cryptocurrencies put forward. These include their use in payment systems or as safe-havens when it comes to stablecoins.
“The Emperor Has No Clothes”
These, he says, are where the real value might lie. However, he points out that the majority of the current crypto-crowd does not appreciate this fact.
“To the vast majority of bitcoin investors, success means its price continues to rise. But if that is all there is to it, someday a little boy will yell, “the Emperor has no clothes”, and the price will come crashing down.”Jon Danielsson – Director of the Systemic Risk Centre, LSE
Indeed, the language native to the crypto-space, particularly the investing or trading factions, follows a pathetically fallacious pattern, linked to the market’s swings.
Think “pump”, “dump”, “moon”, and “crash”. None describe the experiment that is taking place behind the scenes.
While Danielsson’s comments might be considered critical, in actuality, he simply urges the community to look towards “buidling”, not gaining.