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Playing the Crypto Lottery: Renowned Economist Calls Bitcoin a Gamble, Not an Investment

Eminent economist David Rosenberg has issued a stark warning to potential cryptocurrency investors: buying Bitcoin is more akin to gambling than investing. In a recent report, Rosenberg, the president of Rosenberg Research and former chief North American economist at Merrill Lynch, likened the purchase of cryptocurrencies to playing the lottery.

According to Rosenberg, traditional investments like stocks, bonds, and commodities have tangible value – stocks represent future cash flows of companies, bonds, and savings accounts yield interest, and commodities have practical industrial uses with demand that can be predicted using economic data. Cryptocurrencies like Bitcoin, he argued, do not fit into these categories of ‘real’ investments.

Rosenberg’s critique is timely, especially following the recent approval of nearly a dozen spot bitcoin ETFs by US regulators. He pointed out the extreme volatility of Bitcoin, highlighting its dramatic price fluctuation from a two-year high of $49,000 to $44,000 in just over a day.

“Who needs this degree of volatility in their lives? Not me, that’s for sure,” Rosenberg stated, emphasizing the risks associated with the unpredictable nature of cryptocurrency values.

His skepticism of the crypto market is rooted in the “greater fool” theory, where the value of an asset is based solely on the speculation that someone else will be willing to pay a higher price. This theory suggests that people invest in cryptos not because they possess intrinsic value, but in the hope of selling them at a profit to someone more optimistic or ‘foolish.’

In a past discussion with Business Insider, Rosenberg highlighted the inherent risks in adding an asset with such erratic price swings to one’s portfolio. He questioned the rationale behind introducing potential 20% to 30% price fluctuations into an investment strategy.

Furthermore, he pointed out the challenge of valuing cryptocurrencies. Unlike traditional assets, they don’t generate returns for investors, making it difficult to assess their true worth. “I don’t know how to value it. Therefore, as they say on ‘Shark Tank’ — ‘I’m out,'” he remarked.

For investors, particularly those with an appetite for the more traditional and stable forms of investments, Rosenberg’s perspective offers a cautionary lens through which to view the crypto market. While the allure of Bitcoin and its counterparts is undeniable in a world captivated by digital innovation and high-return prospects, Rosenberg’s analysis serves as a reminder of the fundamental principles of investing and the importance of understanding what lies beneath the surface of an asset’s value.