NEW YORK (InsideBitcoins) — Bitcoin may be a demand-driven “bubble,” but it is no Ponzi scheme, says Kaushik Basu, World Bank chief economist and author of ‘Ponzis: The Science and Mystique of a Class of Financial Frauds.’
“Contrary to a widely-held opinion, Bitcoin is not a deliberate Ponzi. And there is little to learn by treating it as such,” Basu writes in the recently released report.
However, Basu says the cryptocurrency has been the subject of broad market speculation.
“One can buy Bitcoin the way one can buy euros and trade freely with others having euros. Trouble started when people began speculating that the value of Bitcoin would rise, thereby raising the demand for Bitcoin and making the value-rise a self-fulfilling prophesy. In other words, what we witnessed recently in the Bitcoin phenomenon fits the standard definition of a speculative bubble,” Basu says.
Basu served as chief economic adviser to the government of India and is currently on leave from Cornell University where he is professor of economics and international studies.
“The main value of Bitcoin may, in retrospect, turn out to be the lessons it offers to central banks on the prospects of electronic currency, and on how to enhance efficiency and cut transactions cost,” Basu concludes.