Only a Handful of Cryptocurrencies Would Survive in the Future: Raghuram Rajan

Rajan had warned that only a handful of cryptocurrencies in existence would survive in the future

Former Reserve Bank of India (RBI) Governor Raghuram Rajan said on the sidelines of the World Economic Forum (WEF) annual meeting in Davos that the collapse in the prices of Cryptocurrencies over the past year will allow investors to focus on the "true value" of this new technology.

"The idea that somehow cryptos are going to maintain value, while the fiat currencies collapse. That's nonsense," Rajan said on the sidelines of the World Economic Forum's annual meeting in Davos, Switzerland.

The economist said that fiat currencies have won out in terms of which is more credible.

Rajan's statements come against the backdrop of the crypto market shrinking by $1.4 trillion in 2022, with Bitcoin losing 60 percent of its value. However, it clocked a 26 percent gain in January, breaking above the $20,000 level. Cryptocurrencies have not only tanked but also took a credibility hit when exchange FTX, which was valued at $32 billion a year ago, filed for bankruptcy in November. Founder Sam Bankman-Fried was accused of orchestrating an epic fraud by the investigators.

Cryptocurrencies took a credibility hit in November when crypto exchange FTX, which was valued a year ago at $32 billion, filed for bankruptcy protection in November and U.S. prosecutors accused its founder Bankman-Fried of orchestrating an "epic" fraud that may have cost investors, customers, and lenders billions of dollars.

Rajan expects the US Federal Reserve to continue raising interest rates for now, while it looks for signs of any slack in the labor market.

"When you still have 200,000 jobs (being created) a month, it suggests that there's still a way to go," he said.

Rajan believes a mild recession wouldn't pose a problem for the U.S. central bank as the Fed believes it can allow the economy to recover by cutting rates.