Merkel is highly distrustful of Bitcoin and has slammed the digital currency in his latest post “Where money goes to die”.
It is Merkel’s belief that the new players in this cryptocurrency boom will eventually disappear, along with the fortunes of those who are only just getting into the game now.
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“The lure of free money brings out the worst economic behavior in people,” Merkel wrote. “That goes double when people see others who they deem less competent than themselves seemingly making lots of money when they are not.”
Merkel outlines the problems he sees with digital currencies, namely: they have no intrinsic value, they cannot be used to settle all debts, and they are less secure than insured bank deposits.
Merkel was full of praise for China’s intervention in limiting the growth of more digital currencies.
“A good argument could be made that they all should be made illegal,” he wrote in his blog post. “It’s almost like we let any promoter set up his own Madoff-like scheme, and sell them to speculators.”
Merkel seems to be inadvertently saying what many investors are saying after this most recent rally, namely that Bitcoin is a bubble that is near to popping.
The financial advisor doled out a stern warning saying that this new asset class will head to zero, and there will be a catastrophic failure when those new to digital currencies panic as a failure cycle brews.
“New asset classes that have never been through a ‘failure cycle’ tend to produce the greatest amounts of panic when they finally fail. And, all asset classes eventually go through failure,” he wrote. “Ultimately, most of the cryptocurrencies will go out at zero. Don’t say I didn’t warn you.”