In a harshest and sharpest rebuke ever, to the devotees of crytocurrencies, Bank of England Governor, Andrew Bailey, cleared the banking and finance air emphasizing, that such have “no intrinsic value” and that those investing in it, should always be ready for any eventuality, including watching their money invested to go down the drain.
Prime digital currencies, especially, bitcoin, ether and dogecoin have gained immense popularity recently in highly developed economies, where the euphoria among investors runs so deep that they are immensely thrilled and bask in the digital tokens’ global spotlight and rising worth. The feeling and joy (of financial security) is somewhat familiar as similar to 2017 when the bitcoin stormed towards $20,000 mark, which however, descended to mere $3,122 in the following year.
During a press briefing on May 7, in London, the question was raised about the security and future of cryptocurrencies at which, Mr. Bailey, acting like a cry wolf, made it crystal clear in his statement dashing all hopes, “They have no intrinsic value. That doesn’t mean to say people don’t put value on them, because they can have extrinsic value. But they have no intrinsic value.”
“I am going to say this very bluntly again, he made an addition. “but then, if you are prepared to lose all your money”.
Interestingly, UK’s Financial Conduct Authority seems to be in the same wagon, with Mr. Bailey, as it declared, “Investing in crypto-assets, or investments and lending linked to them, generally involves taking high risks with investors’ money”. “If consumers invest in these types of product, they should be prepared to lose all their money”.
Mr. Bailey’s outlook is not a sudden unexpected burst of emotions, but rather, he is a long term critique to such ponzi scheme, as he warned with similar aforementioned words.
Bitcoin, case in point, has won numerous favours, far superior, from various financial quarters in recent times, resulting in its value jumping upto 90% this year. To be specific, many prominent corporate houses, have encouraged payment in bitcoins, such as Tesla, for its cars. Tesla, in the beginning of this year, has also invested a fortune in it, when it made a purchase of bitcoins to the tune of $1.5 billions and the worth of its holding also swelled considerably touching $2.5 billion mark.
Arguably, the bitcoin enthusiasts consider it as value-reserve that is similar to precious gold, as the former is limited in supply, i.e. 21 million bitcoins have ever been developed by far and the argument is that it can be used as a hedge in apt response to dreaded inflation while central banks of countries print money to pull their economies out of pandemic siege and to help enable it stay afloat.
But, to those under the cloud of skepticism, bitcoin is a temporary crypto-paradise, a fragile market bubble and a notion like a dream that would eventually shatter, once thins start to crumble.
Commenting on bitcoin’s popularity, Michael Hartnett, who occupies the seat of chief investment strategist at Bank of America Securities, called out, “the mother of all bubbles”. Then, Stephen Isaacs from Alvine Capital expressed his belief that there seems to be “no fundamentals with this product, period”.
In the mean time, there are certain digital currencies that have superseded bitcoin in terms of monetary favours. For instance, Ether, which is operated upon Ethereum blockchain, enjoys a hefty return of over 360% per annum and then, we also have dogecoin, a crypto whose value surged to colossal 12,500%.
Dogecoin’s thrust into global limelight, can be ascribed to a high frequency of tweets from glamorous personalities of corporate world, such as Elon Musk and Mark Cuban but then, retail investors declared purchasing the token on Robinhood, that is a free-trading app. Terming the dogecoin rally as “a classic example of greater fool theory at play”, Mr. David Kimberly, who is principle analyst at investing app Freetrade in UK, observed it as a procedure whereby assets are overvalued and hen sold to those carried away by its charm, that they won’t mind paying huge sum for it.
Simultaneously, there are many countries, whose central banks contemplate issuance of their own cryptocurrencies. Just past month, again happening in England where Bank of England joined hands with Treasury to look into feasibility and instances of digital currencies as are unrolled by central banks in different counries of the world. Bank maintained the status of such a currency to be at par with cash and bank deposits and would not be their replacement under any situation.