Economist warns Bitcoin is the 'mother of all scams'

Nouriel Roubini, or Dr Doom as he is know, called Blockchain the most over-hyped technology ever. Photo / 123RF

The economist who predicted the 2008 financial crash has warned American politicians that Bitcoin is "the mother of all scams" during a US Senate hearing on cryptocurrency.

Nouriel Roubini, a fierce critic of virtual currency who is known as Dr Doom for his bearish stances, took aim at the blockchain technology underpinning cryptocurrency.

It is often hailed as transformative, even by those cynical about digital coins.

"Blockchain is the most over-hyped technology ever," the New York University professor told the Senate banking committee.

"It is nothing better than a glorified spreadsheet or database. It is clear by now that Bitcoin and other cryptocurrencies represent the mother of all bubbles," he added.

The attack contradicts proponents of blockchain, including the Government's science office.

Prof Roubini said the nickname "s---coins", used by cryptocurrency traders referring to less valuable coins, was "a grave insult to manure".

His scathing attack came as the cryptocurrency market took a battering off the back of tumbling global stock markets. Bitcoin dropped as much as 6.9 per cent to $6,080 ($9,345), its lowest point in two months. At its peak late last year Bitcoin was worth US$20,000.

Traders claim Bitcoin's selling point is that its decentralised nature leaves it immune from stock market volatility, acting more like a "digital gold".

But it appears investors are using traditional equity strategies, suggesting the crypto market could dip further if the stock markets continue downward.

Matt Newton, market analyst at cryptocurrency exchange platform eToro, said the fall was "a sign that the markets are working" and that "much of the 'good news' is currently happening behind the scenes".

Governments are mulling whether to regulate cryptocurrencies, which critics claim are vehicles for scams and money laundering.