Why Former Fed Head Alan Greenspan Thinks Bitcoin is a Bubble

Why Former Fed Head Alan Greenspan Thinks Bitcoin is a Bubble
Why Former Fed Head Alan Greenspan Thinks Bitcoin is a Bubble

Why Former Fed Head Alan Greenspan Thinks Bitcoin is a Bubble

Bitcoin touched the benchmark of $1200 recently and have been trading above $1000 for quite some days now; however, former Federal Reserve Chairman Alan Greenspan believes that it is a bubble. He says it is not a currency but bubble. In his interview to Bloomberg Television he was candid about the virtual currency amidst the news that Beijing regulators are planning to ban Chinese financial institutions from using it for any kind of transactions.

Alan Greenspan, the person who is blamed for being the leading cause of the subprime mortgage crisis, says, “You really have to stretch your imagination to infer what the intrinsic value of Bitcoin is. I haven’t been able to do it.” He adds, “But if you ask me, ‘Is this a bubble in Bitcoin?’ He reiterated that Bitcoin is not backed by anything and laughed when asked if Bitcoin is the new gold.

His construct is based on the fact that investors would not question the intrinsic value of gold and traditional currencies; however, they would if it is Bitcoin; however, the way Bitcoin is moving up in almost all parts of the world, he sounds wrong on it. Investors fairly well understand Bitcoin and investing carefully for higher returns.

The traditional financial system is being challenged by Bitcoin and that is visible from the statement made by Alan Greenspan. Bitcoin has clearly got a yes nod from a court in the U.S., some countries consider it a valid tender and thousands of venders accept them in exchange of goods and services.


Alan Greenspan doubts about the backing of Bitcoin and says he does not understand where the backing of Bitcoin is coming from. He says that there is no fundamental issue of capabilities of repaying it in anything which is universally acceptable, which is either intrinsic value of the currency or the credit or trust of the individual who is issuing the money, whether it’s a government or an individual.

The U.S. Departments and Judiciary Have Not Yet Objected to Virtual Currencies
His is statements which are contradicted by a statement by a U.S. Justice Department official who in a hearing at a U.S. Senate committee last month said that Bitcoins could be legal means of exchange. A similar statement came from Mythili Raman, acting assistant attorney general at the department’s criminal division when he said that virtual currencies are not illegal.

Similarly, there was no objection on the part of departing Fed chairman Ben Bernanke who told the Senate committee the U.S. central bank had no plans to regulate the currency. He then had said that although the Federal Reserve generally monitors developments in virtual currencies and other payments system innovations, it does not necessarily have authority to directly supervise or regulate these innovations or the entities that provide them to the market.

To contact the reporter of this story: Deepak Tiwari at deepak@forexminute.com