Those watching the cryptocurrency space will be well-versed with the various cryptocurrency naysayers that weigh in on the subject. A professor from Santa Clara University is now suggesting that Bitcoin’s recent decline means it has entered a ”death spiral.”
The finance professor is known for his cryptocurrency-averse statements
Specifically, this news comes from an opinion editorial published on MarketWatch by Atulya Sarin. Sarin is a professor of finance, and has previously shared his bearish views on cryptocurrencies.
When Bitcoin traded around $7,000 earlier this year, Sarin published an article that highlighted the rising cost of cryptocurrency mining. At the time, he argued that this could potentially be a future source of worry for the cryptocurrency.
Furthermore, he also noted that the ability of bearish investors to short Bitcoin through futures markets as a worrying factor. Although the price of Bitcoin has decreased by around 45% since this time, short sellers and costly mining operations have not generally been considered the main sources of this price decrease.
In Sarin’s latest op-ed, however, he is continuing on his beaten track, reiterating a gloom-and-doom outlook. More specifically, Sarin writes that Bitcoin has now ”entered a death spiral”, which means it is ”close to becoming worthless.”
He is also repeating his previous worries over the cost of cryptocurrency mining. Moreover, Sarin suggests that this will, in turn, drive the price of Bitcoin lower.
”Mining at a cost higher than the cost at which you can sell in the futures market destroys value. So, any rational investor – even one who strongly believes the price of Bitcoin will rebound – has no inventive to mine if the cost of mining is higher than the future price and is better off buying in the futures market,” Sarin writes.
Sarin: Bitcoin will not become digital gold
Although many have suggested that Bitcoin could become a digital equivalent to gold, Sarin also goes on to question this presupposition.
”Unlike gold,” Sarin continues, ”which can retain its value even if mining activity stops, Bitcoin can have no value absent the mining activity that maintains the ledger of who owns it. Absent the mining activity, Bitcoin is just a set of encrypted numbers with no value.”
The proposal that Bitcoin would now be in its death throes could, however, be questioned by those who have witnessed Bitcoin’s countless rollercoaster-ride cycles, with both sudden drops and peaks. Sarin also suggests that the cryptocurrency market’s supposedly impending death will be ”swift” – something which remains to be seen.
Image Source: “Bitcoinist“
Rasmus Pihl is a writer for Toshi Times by day and an avid follower of the cryptocurrency industry by night. Rasmus holds a Bachelor’s Degree in Marketing from the Gothenburg School of Business, Economics, and Law and runs a Swedish marketing consulting firm. Moreover, when he isn’t writing for Toshi Times, traveling, working or changing the world in some other capacity, Rasmus is more than likely caught up in postgraduate studies.