Nobel Prize Shiller is repeating Bitcoin is the next bubble

Robert Shiller, the Nobel-winning author who predicted the two biggest speculative markets in recent history, is repeating that bitcoin is in a bubble.

In January 2014 at the World Economic Forum in Davos, Switzerland, he called the cryptocurrency "an amazing example of a bubble," adding that there was "no question about it."

In an interview with Quartz and published Tuesday, Shiller was asked to name the best example of irrational exuberance or speculative bubble he can think of right now. 

"The best example right now is bitcoin," he said. "And I think that has to do with the motivating quality of the bitcoin story. And I’ve seen it in my students at Yale. You start talking about bitcoin and they’re excited! And I think, what’s so exciting? You have to think like humanities people. What is this bitcoin story?"

For evidence that bitcoin is in a bubble, Shiller pointed to "a fundamental deep angst of our digitization and computers, that people wonder what their place is in this new world." That fear gives some people a sense that they know the future and can profit from it, he told Quartz.

“It starts with Satoshi Nakamoto. He’s never been found. That has a nice mystery quality to it. And then he has this clever idea about encryption and Blockchain and public ledgers, and somehow the idea is so powerful that governments can’t even stop it. You can’t regulate this. It kind of fits in with the angst of this time in history.

Shiller also told Quartz that there were "aspects of a housing bubble and a stock-market bubble right now." The cyclically adjusted price-to-earnings ratio that he popularized shows that stocks are the most expensive since the tech bubble collapsed in 2000.

By giving people a tangible asset whose prices seems to only go up, bitcoin has served as a salve for that anxiety, Shiller explained. Bitcoin "gives a sense of empowerment" in such an atmosphere, Shiller said. It allows people to feel like "I understand what’s happening! I can speculate and I can be rich from understanding this!"

The problem, of course, is that speculative bubbles generally burst, and no one knows exactly when they'll pop.