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Economists and commentators are thus increasingly concerned that this may be a bubble waiting to burst. We review recent opinions on the topic. December 4, Topic: That excitement has shifted to the world of cryptocurrencies like Bitcoin and Ethereum. There are three strands to their appeal: These three factors explain why there is some demand for Bitcoin — but not the recent surge.
A much more plausible reason for the demand for Bitcoin is that the price is going up rapidly. Excessive fragmentation could prove a bug for bitcoin, just as it did for the US financial system during the free banking era. Third, the asset could fall into the hands of hackers — as happened in Fourth, the introduction of futures could lead more investors to enter into positions that put downwards pressure on prices. Why would we expect the way down to be any different?
Economists have been weighing in on the debate, sometimes proposing extreme solutions. Tirole argues that bitcoin is a pure bubble, an asset without intrinsic value — thus unsustainable if trust vanishes.
Bitcoin may be a libertarian dream, but it is a real headache for anyone who views public policy as a necessary complement to market economies. It is still too often used for tax evasion or money laundering, and it presents problems in terms of the ability of central banks to run countercyclical policies. Technological advances can improve the efficiency of financial transactions, but should not lead us to abstract from economic fundamentals.
For now, the regulatory environment remains a free-for-all, but if bitcoin were to be stripped of its near-anonymity, it would be hard to justify its current price. Perhaps bitcoin speculators are betting that there will always be a consortium of rogue states allowing anonymous bitcoin usage, or even state actors such as North Korea that will exploit it.
It is also hard to see what would stop central banks from creating their own digital currencies and using regulation to tilt the playing field until they win. The long history of currency tells us that what the private sector innovates, the state eventually regulates and appropriates.
He argues we should think of Bitcoin as competing for some of the asset space held by gold and also to some extent art. It is hard to ship, but has some extra value because it is perceived as a focal asset and one that does not covary positively in a simple way with the market portfolio. Gold has become less of a hedge, partly because inflation has been low and partly because China and India dominated the gold market more than a few decades ago.
So new and better hedges are needed. And Bitcoin is a strong competitor in this regard. Intersect a convenience yield and speculative demand with a temporarily limited supply, plus temporarily limited supply of substitutes, and you get a price surge.
For decades, regulators across the world have wrestled with the question of how best to mitigate the negative effects of gambling. For the longest time, licensed gambling zones confined to specific geographic areas seemed the optimal solution. The internet has changed all that. Geographic constraints have become meaningless, while innovation — such as the invention of cryptocurrency — has started to compromise the efficacy of bans.
Even if cryptocurrency trading were to be banned, the chances are that as long as some jurisdictions continued permitting it, digitally-enabled backdoor channels would be created to keep servicing clientele in restricted areas.
That leaves only one option for regulators today. Gambling activities must be stigmatised rather than promoted. Bruegel considers itself a public good and takes no institutional standpoint.
Please provide a full reference, clearly stating Bruegel and the relevant author as the source, and include a prominent hyperlink to the original post. The development of e-commerce has affected both demand and supply fundamentals of markets, changing the way competition works. The debate about rethinking economics keeps rambling. We summarise newest contributions to this important discussion.
Remittances flows are very important for developing countries. Following the US announcements in early March of their intent to impose steel and aluminum tariffs, and the subsequent threats from China to retaliate with their own tariffs, the global trade picture remains uncertain.
At this event, we will look into the progress made towards achieving the main priorities for strengthening the digital single market, the opportunities and the challenges at EU level. In theory, robots can directly displace workers from performing specific tasks displacement effect. But they can also expand labour demand through the efficiencies they bring to industrial production productivity effect.
This working paper adopts the local labour market equilibrium approach developed by Acemoglu and Restrepo to assess which effects dominate and the impact of robots on wage growth and employment rate in Europe. This event looked at the impact of robotics and artificial intelligence on employment, wages and EU economic policy.
A paper jointly written by 14 French and German economists set off a debate about the reform of euro-area macroeconomic governance. How is the EU coping with technology shifts and creating the next generation of new leading firms? What does it mean for the ECB? Fintech has the potential to change financial intermediation structures substantially.
It could disrupt existing financial intermediation with new business models empowered by intelligent algorithms, big data, cloud computing and artificial intelligence. Republishing and referencing Bruegel considers itself a public good and takes no institutional standpoint. Read article More on this topic More by this author. The cost of remittances Remittances flows are very important for developing countries.
Read about event More on this topic. Challenges and opportunities for the EU digital single market At this event, we will look into the progress made towards achieving the main priorities for strengthening the digital single market, the opportunities and the challenges at EU level. Wolff and Andrew W. The impact of industrial robots on EU employment and wages: A local labour market approach In theory, robots can directly displace workers from performing specific tasks displacement effect.
Robots and artificial intelligence: The next frontier for employment and EU economic policy This event looked at the impact of robotics and artificial intelligence on employment, wages and EU economic policy. The debate on euro-area reform A paper jointly written by 14 French and German economists set off a debate about the reform of euro-area macroeconomic governance. Are European firms falling behind in the global corporate research race?
Read article More on this topic. Capital Markets Union and the Fintech Opportunity Fintech has the potential to change financial intermediation structures substantially.