Cryptocurrency investors to lose all their money, says Bank of England governor 

Cryptocurrency investors to lose all their money, says Bank of England governor 

CRYPTOCURRENCY:

 Cryptocurrencies “have no intrinsic value” and people who invest in them should be prepared to lose all their money; Bank of England (BOE) Governor Andrew Bailey said Thursday.

 

Digital currencies like bitcoin, ether and even dogecoin have been on a tear this year; reminding some investors of the 2017 crypto bubble in which bitcoin blasted toward $20,000, only to sink as low as $3,122 a year later.

Asked at a press conference about the rising value of cryptocurrencies on Thursday, Bailey said: “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’m going to say this very bluntly again,” he added. “Buy them only if you’re prepared to lose all your money.”

 

Bailey’s comments echoed a similar warning from the U.K.’s Financial Conduct Authority (FCA).

 

“Investing in cryptoassets, or investments and lending linked to them, generally involves taking very high risks with investors’ money;” the financial services watchdog said in January.

 

“If consumers invest in these types of product, they should be prepared to lose all their money.”

Bailey, who was formerly the chief executive of the FCA, has long been a skeptic of crypto.

 

In 2017, he warned: “If you want to invest in bitcoin, be prepared to lose all your money.”

Bitcoin is up over 90% so far this year, thanks in part to rising interest from institutional investors and corporate buyers such as Tesla.

 

The electric car firm bought $1.5 billion worth of bitcoin earlier this year, and the value of its holdings have since risen to nearly $2.5 billion.

 

Proponents of bitcoin see it as a store of value akin to gold because of its scarce supply — only 21 million bitcoins can ever be minted; — arguing that the cryptocurrency can act as a hedge against inflation as central banks around the world print money to relieve coronavirus-battered economies.

ALSO READ: TIME accepts payment in cryptocurrency for digital subscriptions

 

However, skeptics view bitcoin as a market bubble waiting to burst. Michael Hartnett, chief investment strategist at Bank of America Securities; said bitcoin’s rally looks like the “mother of all bubbles,” while Alvine Capital’s Stephen Isaacs believes there are “no fundamentals with this product, period.”

Meanwhile, alternative digital currencies have made even larger gains than bitcoin.

 

Ether, the native token of the Ethereum blockchain, has seen returns of more than 360% year-to-date; while meme-inspired crypto dogecoin is up a whopping 12,500%.

 

David Kimberley, an analyst at U.K. investing app Freetrade, described the dogecoin rally as “a classic example of greater fool theory at play;” referring to the practice of selling overvalued assets to investors who are willing to pay a higher price.

 

At the same time, central banks are considering whether to issue their own digital currencies.

 

Last month; the Bank of England launched a joint taskforce with the Treasury aimed at exploring central bank digital currencies, or CBDCs.

 

Such a currency would exist alongside cash and bank deposits rather than replacing them; the bank said.

About The Author

Osigweh Lilian Oluchi is a graduate of the University of Lagos where she obtained a B.A (Hons) in English, Masters in Public and International affairs (MPIA). Currently works with 1stnews as a Database Manager / Writer. [email protected]

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