Crypto-Bashing Professor Makes Bitcoin Discovery
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Crypto-Bashing Professor Makes Bitcoin Discovery

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1 year ago

Kenneth Rogoff and a pair of World Bank economists found that 3.3 million Bitcoin transactions were used to make fiat payments over four years.

Crypto-Bashing Professor Makes Bitcoin Discovery

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A pair of senior World Bank economists and a Harvard professor who has been calling Bitcoin a “bubble” for years have released a paper showing that the first cryptocurrency is actually being used as intended — as a digital currency.
Looking at 45 million transactions over four years, Harvard’s Kenneth Rogoff, World Bank chief economist Carmen Reinhart and World Bank economist Clemens Graf von Luckner said they found strong evidence that 3.3 million Bitcoin transactions were used to make fiat payments. They wrote:

“We find that, as a conservative lower bound, over 7% of the 45 million trades on the exchange we explore represent crypto vehicle transactions in which Bitcoin is used to make payment in fiat currency.”

That was the intended purpose of Satoshi Nakamoto’s peer-to-peer digital currency.

Noting that while “roughly 20%” of those were international transactions ranging from capital flight to remittances, the trio said that in “countries with significant restrictions on international capital flows, the share of international trades is much higher.”

While noting that their “work cannot be used to put a price on cryptocurrencies,” they added: 

“It provides the first systematic quantitative evidence that the transactional use of cryptocurrencies constitutes a fundamental component of their value, at least under the current regulatory regime.”

That said, in a footnote at the end of the paper, Rogoff, Reinhart, and von Luckner said: 

“Although our analysis suggests that crypto prices are not a pure speculative bubble, analyzing just one exchange does not allow us to infer anything about the level of Bitcoin prices, which at a bare minimum would require applying our algorithm to a much broader set of crypto markets.” 

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‘Not a Pure Speculative Bubble’

Published this month by the National Bureau of Economic Research, “Decrypting New Age International Capital Flows” studied what it calls “crypto vehicle transactions in which Bitcoin is used to make payment in fiat currency,” on “the world’s largest centralized peer-to-peer exchange market.”
The numbers are very hard, they added. They matched transactions in 135 currencies with an amount identical to eight digits over a very short time frame. A 1% transaction fee means these were not high-speed arbitrage transactions. 

That said, in a footnote at the end of the paper, Rogoff, Reinhart, and von Luckner noted: 

“Although our analysis suggests that crypto prices are not a pure speculative bubble, analyzing just one exchange does not allow us to infer anything about the level of Bitcoin prices, which at a bare minimum would require applying our algorithm to a much broader set of crypto markets.”

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