Bitcoin has failed miserably as a currency, says NYU’s “valuation dean”

Aswath Damodaran, a finance professor at New York University’s Stern School of Business, has repeated his criticism of Bitcoin (BTC).

The NYU professor, who appeared in episode 10 of the Moneycontrol Masterclass program, doubled his long-standing rejection of Bitcoin as a currency.

According to Damodaran, Bitcoin’s limited use in microtransactions contradicts claims that BTC is viable as a form of money, stating:

“In my opinion, good currency is currency that is used to buy coffee, buy your house, buy a car, and in that respect Bitcoin failed, and not just failed, it failed miserably.”

For the NYU professor, dubbed Wall Street’s “dean of valuation,” Bitcoin’s only claim to fame is in the returns from early investors. “When I meet Bitcoin enthusiasts, they seem to have this idea that Bitcoin is a great currency because they made a lot of money with it,” said Damodaran.

The NYU professor previously offered similar variants of this anti-Bitcoin comment, which argues that BTC is not a viable form of currency. During the 2017 bull market, Damodaran argued that market cap growth was not a suitable metric to determine Bitcoin’s success.

Back in April, Damodaran identified volatility and high transaction costs as the main obstacles to Bitcoin’s viability as a medium of exchange. However, the NYU professor’s criticism does not explain the increasing adoption of BTC in the face of financial censorship in many places around the world.

Connected: Ether is a better commodity than Bitcoin, says NYU professor

Aside from rejecting Bitcoin as a currency, Damodaran also contradicted the notion that BTC is a hedge against inflation. According to the NYU professor, BTC behaved like a risky stock during the market upheaval in March 2020.

Damodaran did not mention that Bitcoin ended 2020 with a seven-fold increase in price compared to the Black Thursday crash in March 2020.

The professor’s linchpin, denigrating Bitcoin as a currency in order to reject it as an asset class, also seems to be an emerging topic. Back in May, Damodaran stated that ether (ETH) had a better chance of becoming a commodity than BTC.

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