Economist Nouriel Roubini, notorious for his critical views on cryptocurrency, predicts a forthcoming ‘crypto catastrophe.’ He asserts that the evolution of currency and payments will be gradual, disproving the radical transformation anticipated by some cryptocurrency proponents.

In a recent analysis, Roubini indicated that Bitcoin’s recent decline exemplifies the severe instability of what he refers to as a ‘pseudo-asset class.’ He urged policymakers to be aware of the associated risks to avert further repercussions.

He noted that a year prior, Donald Trump had resumed the presidency with a considerable following from retail crypto investors, garnering notable support from individuals within the crypto sector. This propelled numerous advocates to forecast that Bitcoin could hit $200,000 by the end of 2025, hoping it would eventually be recognized as ‘digital gold.’

Roubini: Bitcoin Lacks Hedging Capability

Roubini criticizes Trump for having dismantled several crypto regulations, including endorsing the Guiding and Establishing National Innovation for US Stable Coins (GENIUS) Act and the Digital Asset Market Clarity (CLARITY) Act. He articulated that Trump benefits from both domestic and international crypto transactions, promoting a meme coin named after himself, and hosting meetings with crypto tycoons at the White House.

He remarked that despite expectations for crypto to thrive amid macroeconomic and geopolitical uncertainties—such as increasing national debt, currency devaluation, trade wars, and escalating tensions with Iran and China—Bitcoin experienced a 6% drop and remained 42% lower than its peak last October. Meanwhile, meme coins associated with Trump and Melania suffered a drastic 95% depreciation.

The economist emphasized that Bitcoin consistently underperforms during bullish trends in gold and behaves similarly to a leveraged speculative asset rather than serving as a financial hedge.

Roubini reiterated his longstanding assertion that cryptocurrencies do not qualify as a functional currency. They fail to meet the criteria of being a unit of account, a viable payment method, or a reliable store of value. He highlighted El Salvador’s experience, where Bitcoin constitutes less than 5% of financial transactions, arguing that crypto lacks tangible utility or income sources.

Related Issues on Stablecoins and Regulations

Roubini commented that the sole substantial crypto application after 17 years has been the stablecoin, which he views as merely a digital variant of fiat money, already replicated in the traditional finance landscape. He believes attempts to create a decentralized financial ecosystem will ultimately fail as authorities will not allow untraceable transactions.

He warned that the GENIUS Act could revive the instability reminiscent of 19th-century free banking since stablecoins lack essential banking regulations. These financial instruments are particularly susceptible to runs as they do not have access to last-resort lenders or deposit security. He criticized proposals that would permit interest payments on stablecoins, arguing they could destabilize the banking sector unless a clear division between payments and credit is established.

As Bitcoin’s price continues to decline, falling by another 6% on Thursday and dipping below $71,600, this ongoing downturn raises broader market concerns. Experts are indicating that persistent pressure on Bitcoin’s price may expose institutional investors with substantial BTC holdings to significant risks.