Bitcoin may never be a widely used medium of exchange, but it has become a useful store of value, former critics concede in 2020.
Humans, being only human, tend to hang on to their cherished beliefs — even in the face of overwhelming contradiction. That’s why recantations — that is, public acts of refuting a previously held opinion — are so rare. This year, however, has presented several notable changes of heart where Bitcoin (BTC) and other cryptocurrencies were concerned — abetted, perhaps, by BTC’s climb to record price levels. Here are eight of the year’s more memorable turnarounds.
Nouriel Roubini, economist
Crypto’s most ferocious critic recanted in 2020. Roubini, an NYU professor of economics who gained fame by predicting the 2007–2009 housing bubble, has in recent years heaped scorn on cryptocurrencies and blockchain technology in general.
What he said in 2018: Part of Roubini’s testimony for the United States Senate went viral: “Crypto is the mother of all scams and (now busted) bubbles.” He also called blockchain “the most over-hyped technology ever, no better than a spreadsheet/database” — and this was just the title of his testimony.
In his Senate visit, Roubini compared Bitcoin “to other famous historical bubbles and scams — like Tulip-mania, the Mississippi Bubble, the South Sea Bubble.” He noted that Bitcoin’s price increases had been two or three times larger than that of previous bubbles, followed by “ensuing collapse and bust as fast and furious and deeper.” At the time, Bitcoin was somewhat in the doldrums, selling at about $6,300.
What he said recently: In a Nov. 6, 2020 interview, Roublini admitted that Bitcoin — selling at about $15,500 at the time — might qualify as a “partial store of value,” primarily because of its algorithm that limits supply to 21 million BTC. Of course, Roubini also declared that Bitcoin “is not scalable, it’s not secure, it’s not decentralized, it’s not a currency,” and that it would be made irrelevant or “crowded out” within three years by central bank digital currencies.
Still, everything is relative. The professor’s partial pullback prompted economic historian Niall Ferguson to comment: “If I were as fond of hyperbole as he [Roubini] is, I would call this the biggest conversion since St. Paul.”
Stanley Druckenmiller, investor
Investor and hedge fund manager Stanley Druckenmiller — the man who “broke the Bank of England” along with George Soros in 1992 by betting against the British pound — appeared to abandon his previous crypto skepticism in 2020.
What he said then: “I look at Bitcoin as a solution in search of a problem,” Druckenmiller told the Economic Club of New York in June 2019. “I don’t understand why we need this thing. […] I wouldn’t be short it, I wouldn’t be long it. […] I don’t understand why it’s a store of value.”
What he says now: In November 2020, worried about the United States Federal Reserve’s Covid-related stimulus efforts, Druckenmiller told CNBC that he now likes Bitcoin as a hedge against inflation, perhaps even more than gold:
“It has a lot of attraction as a store of value both to Millennials and the new West Coast money. […] It’s been around for 13 years and with each passing day it picks up more of its stabilization as a brand. […] Frankly, if the gold bet works, the Bitcoin bet will probably work better because it’s thinner, more illiquid and has a lot more beta to it.”
Larry Fink, CEO of BlackRock
More institutional investors began to notice crypto in 2020. Larry Fink, CEO of BlackRock, the world’s largest asset manager, told the Council on Foreign Relations in December regarding Bitcoin: “Many people are fascinated about it, many people are excited about it.” His remarks came less than two weeks after Rick Rieder, BlackRock’s chief investment officer of fixed income, told CNBC that “Bitcoin is here to stay. […] Bitcoin will take the place of gold to a large extent.”
What he said in 2017: Speaking at a meeting of the Institute of International Finance shortly after BTC reached its all-time high above $5,800 in October 2017, Fink said: “Bitcoin just shows you how much demand for money laundering there is in the world. […] That’s all it is. It’s an index of money laundering.”
What he says now: In his dialog at the Council of Foreign Relations, Fink said, “We look at it as something that’s real,” adding that among three topics discussed recently on BlackRock’s website — COVID-19, monetary policy and Bitcoin — the hits for each topic were 3,000 on COVID, 3,000 on monetary policy, and 600,000 on Bitcoin. “What that tells you is that Bitcoin has caught the attention and the imagination of many people,” said Fink, adding that BTC was still untested and comprised a very small slice of overall asset markets.
Niall Ferguson, economic historian
Ferguson, senior fellow at the Hoover Institution at Stanford University, is one of the world’s best-known economic historians. Author of The Ascent of Money, he has been weighing in on crypto as far back as 2014 — and not always favorably.
What he said in 2014: Digital currencies are a “complete delusion.”
What he says now: “Bitcoin and China are winning the COVID-19 monetary revolution.” That, at least, was the headline he wrote in an opinion piece for Bloomberg in late 2020, which had as a subheading: “The virtual currency is scarce, sovereign and a great place for the rich to store their wealth.”
To be fair, Ferguson backpedaled on his “Crypto is a delusion” remark in early 2019, and even joined a blockchain project, Ampleforth, that year. However, his recent screed suggests he has gone even further now — reconstituting himself as a fully fledged Bitcoin bull. “Bitcoin is gradually being adopted not so much as a means of payment but as a store of value,” he wrote.
Two features were particularly attractive, in Ferguson’s view: Bitcoin’s limited supply (“Built-in scarcity in a virtual world characterized by boundless abundance”) and its sovereignty (“users can pay without going through intermediaries such as banks. They can transact without needing governments to enforce settlement”).
Jim Cramer, financial media pundit
When Bitcoin went on a tear back in December 2017, CNBC’s Jim Cramer was unimpressed. “Bitcoin’s not going to replace gold anytime soon,” he assured viewers. Three years later, Cramer has recalibrated. Maybe he was living too much in the past, he confided to Anthony Pompliano in a Sept. 15 podcast: “I have to start recognizing that maybe I am using a typewriter.”
What he said: “Sooner or later, this thing [Bitcoin] is going to run out of steam,” Cramer predicted in a 2017 Mad Money segment titled, “Is Bitcoin the New Gold Alternative?” outlining five reasons he was suspicious of BTC: 1) No one knows who invented it; 2) No one knows how much the creator(s) kept for themselves; 3) The network lacks transparency; 4) It has no government support; and 5) It is based on nothing but software, which can be hacked.
What he says now: “It’s perfectly logical to add crypto to the [inflation hedge] menu,” along with real estate, art masterpieces and gold, Cramer told Pompliano while voicing his concerns about recent COVID-related stimulus activity that might be inflating the United States dollar. What Cramer liked about Bitcoin “is the scarcity of it. […] My kids when they get my inheritance won’t feel comfortable with gold [but they] will feel comfortable with crypto.”
Dan Schulman, CEO of PayPal
In late October, PayPal Holdings Inc. announced that it would allow users to buy, sell and hold Bitcoin, Ether (ETH), Bitcoin Cash (BCH) and Litecoin (LTC), as well as use these cryptocurrencies for payment at its 28 million merchants globally. This marked a new leaf for the giant payments firm and its CEO, Dan Schulman.
What he said in 2018: Crypto’s volatility “makes it unsuitable to be a real currency that retailers can accept,” Schulman told TheStreet in 2018. “I think you need to separate out the Bitcoin or cryptocurrencies as currencies and the underlying protocol called blockchain.”
What he says now: “There’s no question that people are flocking to digital payments and digital forms of currency,” Schulman told CNBC.
So, how can Schulman’s and PayPal’s new stance be explained? In 2020, PayPal was reportedly feeling some heat from another payments firm, Square, which for several years has allowed BTC purchases through its profitable Cash App unit.
Indeed, only two weeks before PayPal’s Oct. 21 crypto announcement, Square declared that it had purchased $50 million in Bitcoin for its corporate treasury. By comparison, PayPal and Schulman had been more cautious regarding cryptocurrencies.
With the COVID crisis, however, the use of cash has “declined precipitously — something like 40–70%,” the PayPal CEO told Squawk Box co-anchor Andrew Ross Sorkin in November. As noted, PayPal will allow customers to use crypto as a funding source for transactions in any of its merchant sites as of early 2021, but the firm will first convert the crypto into fiat currency before paying retailers. PayPal, not retailers, in other words, will be assuming the crypto’s price volatility risk.
Izabella Kaminska, financial journalist
On the matter of Bitcoin, “financial journalists, too, are capitulating,” noted Ferguson. In late November, “the Financial Times’s Izabella Kaminska, a long-time cryptocurrency skeptic, conceded that Bitcoin had a valid use-case as a hedge against a dystopian future.”
What she said in 2016: Writing in the Financial Times, which she joined in 2008 and for which she is the editor of FT Alphaville, Kaminska declared: “What is clear is that thus far the technology which was supposed to be revolutionizing finance and making it more secure (oddly, by skirting regulations) is looking awfully like the old technology which ran the system into the ground.”
What she says now: “Was all the trouble of creating it [Bitcoin] really worth while? Surprisingly, for a long-term critic, I’m going to say yes,” Kaminska wrote in a Nov. 24, 2020 FT piece.
What changed? Not Kaminska’s fundamental view of the cryptocurrency, at least. BTC remains “an intrinsically volatile and inelastic form of money” and is unlikely to ever become a widely used form of currency. “Yet there is one scenario that changes everything: a world in which no government is prepared to stand up for true civil liberties or free enterprise,” she wrote.
Such a scenario seemed far-fetched only a year ago, but with the COVID-19 crisis, it’s now at least imaginable. For a future “in which the world slips towards authoritarianism and civil liberties cannot be taken for granted […] Bitcoin’s anonymous security acts as a hedge against the worst of dystopian realities” — that is, as a sort of doomsday contingency system — and for that, “I am glad someone created Bitcoin.”
Ray Dalio, hedge fund founder
Ray Dalio is the founder of Bridgewater Associates, the world’s largest hedge fund. Dalio surprised Reddit users recently when he acknowledged that over the past 10 years, Bitcoin and some other cryptocurrencies “have established themselves as interesting gold-like asset alternatives.” Until recently, Dalio was regarded as a staunch crypto skeptic.
What he said in 2017: “Bitcoin is a bubble,” Dalio told CNBC. He claimed the token’s volatility makes it a poor store of value, and a holder would be hard-pressed to spend it anywhere. “Bitcoin is a highly speculative market.”
What he says now: In his Dec. 8 Reddit “Ask Me Anything” session, Dalio opined that Bitcoin might now serve effectively as a “diversifier to gold,” given BTC’s limited supply and its mobility — unlike real estate, for example. Like some other investors who have reversed their positions on crypto recently, Dalio was worried about the “depreciating value of money” in the post-pandemic global economy.
Gaining traction as a store of value
Indeed, if there is one thread running 2020’s recantations, it’s fear of inflation in the wake of economic stimulus measures taken by governments to avoid post-COVID economic collapse. Bitcoin may or may never become a useful medium of exchange, but it has clearly gained traction as a store of value, as its former critics now concede.