Bitcoin. Picture: REUTERS/BENOIT TESSIER
Bitcoin. Picture: REUTERS/BENOIT TESSIER

A day after Nobel laureate Joseph Stiglitz said bitcoin should be outlawed, another winner of the economics prize said the digital currency will eventually repeat the US stockmarket crash that preceded the great depression.

Robert J Shiller, the Yale economist whose work covers the prediction of asset prices — and the inefficiency of markets — said the attraction of the currency was a narrative akin to a "mystery movie" that draws in people who want to outsmart the system.

"Bitcoin, it’s just absolutely exciting," Shiller said at a conference in Vilnius, Lithuania on Thursday. "You’re fast. You’re smart. You’ve figured out nobody else understands. You’re with it. And bitcoin has this anti-government, anti-regulation feel. It’s such a wonderful story. If it were only true."

Price swings in the world’s most popular digital currency are increasing amid speculation that bitcoin’s almost 1,000% gain this year may not continue. Bitcoin surpassed $11,000 in a matter of hours after reaching $10,000 on Wednesday. It then fell almost 20% before recovering.

"I don’t know where it’s going to stop," said Shiller, who won the Nobel Prize in Economic Sciences in 2013. "It’s going to go way up, like the stockmarket in the 1920s. We will reach a 1929 eventually. But then it won’t go to zero, it just will come down."

A day earlier, Stiglitz called bitcoin "a bubble" that’s going to excite people as it rides up and then drops.

"So it seems to me it ought to be outlawed," Stiglitz said on Wednesday in a Bloomberg Television interview. "It doesn’t serve any socially useful function."

Bloomberg

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