In a note titled “I come to bury Bitcoin, not to praise it,” Paul Donovan, UBS bank’s wealth management global chief economist, took the opportunity on Tuesday to predict that Bitcoin is not just an economic bubble, but one that has begun to burst.
Looking at a drop in value from near $20,000 at the end of 2017 to as low as $3,200 last week, the longtime cryptocurrency skeptic felt confident enough to say:
“The cryptocurrency bubble may be in its death throes. A loss of over 80% is not healthy. Economists said from the start that Bitcoin and the like would never be currencies. They never will be currencies. Their designers are brilliant at maths. Their designers appear to know nothing about economics.”
The Swiss banking giant’s economist doubled down in an interview on CNBC’s “Fast Money” on Thursday, saying it is “fatally flawed” and that “anyone with a high school education in economics has been a bitcoin skeptic from the start.”
While Bitcoin’s price has recovered to around $3,975 as of publishing time, Donovan said, “these things we’re never going to be currencies, they’re not going to be currencies at any point in the future.”
At the same time Donovan, like many other Bitcoin critics, was careful to separate his skepticism of cryptocurrencies from the technology that underpins it. In fact, he thinks Bitcoin’s death could be the best thing to happen to blockchain.
“The underlying technology of blockchain, the distributed ledger system, that’s different,” Donovan told CNBC. “I mean, there’s an economic proposition there,” he said, although adding, “again, there’s a certain amount of hype around it.”
He’s far from the only one with that “blockchain not Bitcoin” perspective. Jamie Dimon, chairman and CEO of JPMorgan Chase, is still a cryptocurrency skeptic despite having walked back—somewhat—from stronger earlier comments calling Bitcoin a “fraud.”
In the Harvard Business Review’s July-August issue this year, Dimon said that cryptocurrencies are not the same as gold or fiat currencies, which are “supported by law, police, courts.”
He went on to add that “Blockchain, on the other hand, is real. We’re testing it and will use it for a whole lot of things.”
That’s a point Donovan also made in his note on Tuesday, arguing that when cryptocurrencies do die, “the time, effort and electricity that built the bubble can now be used to do something useful.”