Former Federal Reserve Chairman Alan Greenspan dismissed arguments that FTX’s collapse was the result of simple negligence or bad bookkeeping this week, referring to the cryptocurrency site’s downfall as “purely fraud.”
Bankman-Fried has repeatedly attributed FTX’s collapse to sloppy accounting practices and other mistakes, even as authorities allege he used customer funds to bankroll and lavish lifestyle and prop up risky bets at his cryptocurrency hedge fund, Alameda Research.
Greenspan, 96, served as Fed Chair from 1987 to 2006. His five-term stint as head of the central bank stretched across four presidencies, beginning with Ronald Reagan and concluding with George W. Bush.
Greenspan expressed skepticism about the value of cryptocurrencies as a whole.
“With respect to the wider crypto universe – I view the asset class as too dependent on the “greater fool theory” to be a desirable investment,” Greenspan said.
In investing, the greater fool theory refers to the concept that an overpriced asset will continue to rise because other “foolish” investors are willing to pay more to acquire it.
During a TechCrunch event last June, billionaire Bill Gates asserted that the cryptocurrency and NFT markets were “100%” based on the greater fool theory.
Fellow investment luminaries Jamie Dimon, Charlie Munger and Warren Buffett have also been critical of the cryptocurrency sector as a whole.
Greenspan also downplayed concerns that FTX’s bankruptcy would become a “contagion” event that spread to the wider economy. He noted that past collapses in the housing and tech markets were “credit-fueled asset bubbles” – a trend the FTX crisis does not share.
“There does not appear to be a significant amount of leverage dedicated to the cryptocurrency/NFT space at this time, so I do not expect contagion to spread very far beyond this particular asset class,” Greenspan said.
Source: NYPost Technology