Former Fed Chair Alan Greenspan: Crypto Is Too Dependent on ‘Greater Fool Theory’ to Be a Desirable Investment

Former Federal Reserve Chairman Alan Greenspan says crypto is “too babelike connected the ‘greater fool theory’ to beryllium a desirable investment.” However, helium noted that the illness of crypto speech FTX was “purely fraud,” alternatively than the effect of a diagnostic inherent to crypto. He does not expect the FTX contagion to dispersed acold beyond the crypto space.

Alan Greenspan connected Crypto, FTX, and US Economy

Former Federal Reserve Chairman Alan Greenspan shared his views connected cryptocurrency, the collapsed crypto speech FTX, and the U.S. system successful a year-end Q&A published by Advisors Capital Management this week.

Greenspan served 5 presumption arsenic president of the Board of Governors of the Federal Reserve System from 1987 to 2006. He was appointed president by 4 antithetic U.S. presidents. He joined Advisors Capital Management successful September 2016 arsenic Economic Advisor to the plus absorption firm.

The erstwhile Fed seat was asked to remark connected the FTX meltdown and whether helium expects contagion from it. “I bash not expect the fallout from FTX to dispersed beyond the cryptocurrency/NFT [non-fungible token] space,” Greenspan replied, citing “the accusation that has travel to airy truthful far.” He stressed:

The illness of FTX was not a effect of lax hazard management, inadequate accounting procedures, oregon immoderate diagnostic inherent to crypto — it was purely fraud.

“Fortunately, though FTX and firms similar it person accrued selling of their products successful caller years, the deficiency of immoderate noticeable wide marketplace absorption to FTX suggests that they are inactive reasonably concentrated successful the hands of a comparatively tiny subset of investors,” Greenspan described.

“Moreover, the differences we observed successful the aftermaths of the popping of the tech bubble and the popping of the lodging bubble showed intelligibly that credit-fueled plus bubbles make acold much contagion erstwhile they yet deflate,” helium opined. “There does not look to beryllium a important magnitude of leverage dedicated to the cryptocurrency/NFT abstraction astatine this time, truthful I bash not expect contagion to dispersed precise acold beyond this peculiar plus class.”

The erstwhile Federal Reserve main added:

With respect to the wider crypto universe, I presumption the plus people arsenic excessively babelike connected the ‘greater fool theory’ to beryllium a desirable investment.

Greenspan besides shared his presumption connected the U.S. system and the Federal Reserve’s combat against inflation. Commenting connected whether a recession is required to bring down ostentation arsenic immoderate economists person suggested, helium said:

A recession does look to beryllium the astir apt result astatine this time.

However, helium does not judge “a Fed reversal that is important capable to debar astatine slightest a mild recession” is warranted. “Wage increases, and by hold employment, inactive request to soften further for a pullback successful ostentation to beryllium thing much than transitory. So, we whitethorn person a little play of calm connected the ostentation beforehand but I deliberation it volition beryllium excessively small excessively late,” Greenspan concluded.

Do you hold with erstwhile Fed Chairman Alan Greenspan astir crypto and the U.S. economy? Let america cognize successful the comments conception below.

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