Bitcoin could become ‘worthless’, Bank of England warns

[OZER]

The Bank of England has said that bitcoin could be "worthless" and people investing in the digital currency should be prepared to lose everything.

In a warning over the potential risks for investors, the central bank questioned whether there was any inherent worth in the most prominent digital currency, which has soared in value this year to close to $50,000 (£37,786) a piece.

The cryptocurrency peaked above $67,000 in early November, but suffered a sell-off after news first broke of the Omicron variant of coronavirus, before stabilising around its current level in the past week.

The deputy governor, Sir Jon Cunliffe, said the Bank had to be ready for risks linked to the rise of the crypto asset following rapid growth in its popularity. "Their price can vary quite considerably and [bitcoins] could theoretically or practically drop to zero," he told the BBC.

The market capitalisation of crypto assets has grown tenfold since early 2020 to about $2.6tn, representing about 1% of global financial assets. About 0.1% of UK households' wealth is in bitcoin and similar crypto assets, such as ethereum and Binance coin. As many as 2.3 million people hold crypto assets, at an average amount of about £300 each.

The Bank's financial policy committee, set up in the wake of the 2008 financial crisis to monitor risks, said on Monday there was little direct threat to the stability of the UK financial system from crypto assets. However, it warned that, at the current rapid pace of growth, such assets could become more interconnected with traditional financial services and were likely to pose a number of risks.

Publishing its regular health check on the financial system, the Bank said major institutions should take a cautious approach to adopting crypto assets and that it would pay close attention to developments in the market.

"Enhanced regulatory and law enforcement frameworks, both domestically and at a global level, are needed to influence developments in these fast-growing markets in order to manage risks, encourage sustainable innovation and maintain broader trust and integrity in the financial system," it said.

In a separate blogpost published on its website on Tuesday, a member of the Bank's staff said bitcoin failed to fulfil many of the features required of a currency and that it risked being inherently volatile.

Thomas Belsham, who works in the Bank's stakeholder and media engagement division, wrote: "The problem is that, unlike traditional forms of money, Bitcoin isn't used to price things other than itself. As Bitcoiners themselves are fond of saying, 'one Bitcoin = one Bitcoin'. But a tautology does not a currency make."

He said scarcity of the crypto asset – which is limited to 21m bitcoin – is among the key reasons for its attraction for investors, but this feature embedded into its design "may even, ultimately, render Bitcoin worthless".

About 19m bitcoin is currently in circulation, with new coins added when "miners" validate changes to the blockchain ledger underpinning the cryptocurrency. While the ultimate number of bitcoin in circulation is not expected to be reached until February 2140, it would become harder to sustain this system over time, Belsham said.

"Simple game theory tells us that a process of backward induction should, really, at some point, induce the smart money to get out. And were that to happen, investors really should be prepared to lose everything. Eventually."

[Krivokid11]

Crazy how when its a Covid  these devils hid the comments

[flounder]

The world economy is going to crash hard

[neilwad]

I once heard someone say that something that cant last forever will end

[moon_rocks]

Month per person price! No gouging or gentrification! Developing mostly single unit apartments since privacy is a human right! 4. All three of these points to eradicate poverty,  homelessness,  suffrage of Americans Per Year ( tax free ) 3. Locked Down $400Month for life for the first $36,000Hour and up for all Americans  2. UBI of $3,000BBB Plan should be: 1. Livable wage permanent laws of $27

[old_peculiar]

Diversity and under-representation concerns with banking and minority wealth creation, CFTC and SEC common regulatory regimes, asset regulation properties and risk-gradientization vs binarization as "is security" or "is not security", spot Bitcoin ETF confusion despite futures ETF prices coming from spot prices, zk-snark-based tax ids and digital zk-based digital ids generally, FDIC insurrance on stablecoins taking into account USDC's similarities to and differences from a bank, CBDC principles, broker definition clarification and narrowing...all good stuff. Keep it up y'all! Looking forward to the next one.

[engdahl]

I need inflation in my wages!!!!!!

[percussionist]

End corporate welfare, raise taxes on ppl making over 400k a year and raise interest rates.

[Bogeyman]

Can not stop bcoz u still print money to wall street and create more wealth gap. Delay to increase interest to help big tech cos. DONT LIE TO ME AND US PPL.

[energumen]

This is why these legacy companies and mainstream media are dying because you cannot adapt not even you way of thinking, of course companies have the potential to make more money and are valued more theres more money in the system something that happens all the time throughout history.

[meme5lol200]

Crypto market is becoming more appealing to investors seeking low-correlation assets that diversify portfolios, with no doubt in mind that we are  going bull with little signs of stopping. I'd say it's out rightly wrong to just sit back hold and wait maybe incur some losses along the line, that's a wrong mindset for an investor because as an investor finding ways to always increase and stack up more coins thereby making profits should be the way of life, even experienced traders are in a doubt to take long or short position, The conditions of this bull market are unlike anything we have ever seen. I got this tips first hand from Ethan Wilbert he is always a step ahead of other traders, he fully monitored all my trades to avoid me making mistakes and losing my money. My earnings has increased drastically from 2.1Bitcoin to 17.7Bitcoin in just 3 months and 2 weeks. I've got full confidence in he's trade abilities. it's advisable for every investor to take advantage of he's strategy , Ethan can be reached on @ [ @Tutorwilberts]

[AlsoJustice]

They are missing the most important piece of this bubble story : massive money supply increases.

[demorocz]

lmao... yeah... everybody sitting around the office with graduate degrees with no1 to do their work for them

[Michael_Lee]

Lmao imagine saying that inflation happens because someone asks for a raise. What about not lying for once? People are desperately asking for a raise trying to keep up with the rampant inflation that money printing creates

[red_xephos12]

Should be titled "Can the government spending and Fed printing be stopped?"