Slashdot is powered by your submissions, so send in your scoop

 


Forgot your password?
Close
typodupeerror
×
The Almighty Buck Bitcoin

Bitcoin Could Become 'Worthless,' Bank of England Warns (theguardian.com) 271

Posted by BeauHD from the risk-warnings dept.
The Bank of England has said that bitcoin could be "worthless" and people investing in the digital currency should be prepared to lose everything. The Guardian reports: 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 a piece. 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 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 fulfill 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."
This discussion has been archived. No new comments can be posted.

Bitcoin Could Become 'Worthless,' Bank of England Warns More

Bitcoin Could Become 'Worthless,' Bank of England Warns

Comments Filter:

  • bitcoin has alot of speculation & regulatory h (Score:4, Insightful)

    by Joe_Dragon ( 2206452 ) on Tuesday December 14, 2021 @09:41PM (#62081361)

    bitcoin has alot of speculation & when the regulatory hammer comes down people may be suck with coin that is hard to exchange

  • As do all things that have no intrinsic value (Score:3, Interesting)

    by jiriw ( 444695 ) on Tuesday December 14, 2021 @09:42PM (#62081365) Homepage

    As long as there is a fool buying, or a government backing or people trusting... there is a value of exchange. Crypto, fiat, art... But over night it can become random numbers, toilet paper or firewood.

    And to be fair, bitcoin is a dinosaur among cryptocurrencies. Nowadays its speculative value is all that's left. Where is its more than a decade old promise of being a fast low-cost untraceable secure medium of exchange? But those are just my ramblings.

    • over night it can become random numbers, toilet paper or firewood.

      I predict toilet paper and firewood will be worth their weight in faberge eggs some time soon.

    • Re: (Score:2)

      by fermion ( 181285 )
      There is nothing with intrinsic vale. There are costs associated with something, and we hope we can recoup and maybe profit, but there is no obligation for anyone to exchange at what we call a fair rate. So farmers grow food, get paid, and the government make up for the fact that food has no intrinsic value.

      Bitcoins requires some effort and power. That gives them value. Like food, the question is how much perceived value they have. Investment means we expect the value to increase. A bitcoins like any othe

      • Bitcoins requires some effort and power. That gives them value.

        Jogging around the block requires effort too, but no one is going to pay you to do it. Bitcoin doesn’t have value because of the horrendously inefficient means of securing its blockchain, it has “value” based on its brand recognition and that’s basically it. Every fork/spin-off of Bitcoin is nearly identical in functionality (and some are arguably better), yet Bitcoin is still the top dog in terms of price per coin.

        It’s the same reason a Monster Cable cord for digital signals

      • Re:As do all things that have no intrinsic value (Score:5, Insightful)

        by Required Snark ( 1702878 ) on Wednesday December 15, 2021 @02:33AM (#62081863)
        "So farmers grow food, get paid, and the government make up for the fact that food has no intrinsic value."

        What is the intrinsic nutritional value of Bitcoin? I just made some pasta, and according to the label a 56 gram serving has 210 calories. If Bitcoin had a nutrition label it would be zero calories. If you went on an all Bitcoin diet you would die of starvation.

        So in what universe are food and cryptocurrency the same? I haven't been to that universe.

    • It's value is based almost entirely on its convenience for use in money laundering. It lacks the legal authority of a government's fiat currency while being almost completely unfit for use as a currency. It's incredibly prone the currency manipulation by large players and any attempt to regulate it will very quickly collapse its value as the money laundering becomes impossible and it's forced to live as an actual currency. If you start applying anti-money laundering regulations and anti-currency manipulatio

    • On type currency can never lose all value (Score:4, Insightful)

      by raymorris ( 2726007 ) on Tuesday December 14, 2021 @11:14PM (#62081555) Journal

      There is one kind of currency that can almost never be worthless, or indeed by worth much less than the creator wants it to be worth.

      The price is of course determined by the ratio of supply and demand. If people WANT something, they'll pay a price for it. Imagine this scenario. There is a law that all people must bring 20 pounds of potatoes to the county sheriff every month. If you don't show up with the potatoes, the sheriff will seize your bank account, your car, and perhaps your house, sell it, and use the proceeds to buy the potatoes.

      Under such a scenario, would people be motivated to get potatoes? Of course. That would ensure that the price of potatoes stays high (unless the sheriff gives the potatoes right back, so everyone has plenty of potatoes). So long as the law forces each person to get new potatoes each month, the demand for potatoes will be high and the price will be high.

      April 15th is the day you're required to hand over dollars to the government. Fail to get dollars for the government and you can end up in jail. That ensures a high demand for dollars.

      There are exactly two ways the dollar or similar currencies can lose significant value. If the government, and the IRS, ceased to exist nobody would need to pay taxes in dollars (unless the warlords who took over demanded dollars). That can result in the dollar plummeting. The other way is when politicians took over the fed and print far too many dollars in am attempt to buy votes. When you have far too much of something, nobody is willing to do much for it and it loses value.

      So long as we have the IRS and the fed operating, the dollar will be worth whatever the fed wants it to be worth. Because those two control the demand and the supply.

      What controls the demand for Bitcoin? People buy Bitcoin because they expect the price to go up. If the price kept dropping, people would be getting rid of it, not buying it. That's it. Don't get me wrong - the price will keep going up. For as long as people keep buying MORE every day and every week.

      • There are exactly two ways the dollar or similar currencies can lose significant value.

        Ultimately, the dollar value is based on how much confidence/faith people have in the government. People are prepared to accept currency because they believe broadly speaking it will be worth something tomorrow and they can use that.

        The third way it can lose value is if people lose faith. Once people stop believing it'll be worth about the same tomorrow, they start charging a lot more to hedge, and that gives hyperinflat

      • Re:On type currency can never lose all value (Score:4, Insightful)

        by sjames ( 1099 ) on Wednesday December 15, 2021 @09:35AM (#62082537) Homepage Journal

        Not necessarily. If it gets widely banned it's value will plummet as people divest. If someone amasses enough mining hardware to dictate what transactions are valid, it'll be dumped overnight. Due to it's lack of intrinsic value, nothing makes it remain above zero.

        OTOH, food could flood the market and will still retain some value since people will continue to need to eat.

    • Bitcoin has intrinsic value. It is a central bank proof, counterfeit proof, double spend proof digital store and transfer of value tool which is paralleled by none.

      Bitcoin never promised to be untraceable, it is a public ledger by design, total transparency. Now if someone knows which address belongs to you, that is YOUR vulnerability not Bitcoin's. As for fast and low cost, Bitcoin is a very fast and low cost way to purchase a house and for your day-to-day transactions there is lightning.

      As for 'dinosaur'

      • Bitcoin has intrinsic value. It is a central bank proof, counterfeit proof, double spend proof digital store and transfer of value tool which is paralleled by none.

        You can make an infinite number of bitcoin clones.
        Bitcoin is just a brand. A successful one at the moment, but still just a brand. A better one could come along at any time.

      • Re: (Score:2)

        by N1AK ( 864906 )
        Bitcoins do not have intrinsic value. You can't use it to keep warm, as food etc etc. Possessing a Bitcoin does not provide any benefit, except the ability to trade it for something else, just like a fiat currency. That doesn't mean BTC isn't useful or valuable, and lots of things are without having intrinsic value.

    • Art and Crypto? (Score:5, Insightful)

      by Petersko ( 564140 ) on Wednesday December 15, 2021 @12:53AM (#62081737)

      I wouldn't put these in the same classifications of intrinsic value.

      Art has been traded internationally for at least 600 years. Let's say you have in front of you 1 bitcoin (etched in all its glory into sheets of otherwise worthless but long-lived metal) and 1 small sculpture from a well-known artist, and you are told you get to choose one of them, but you have to lock it away in a conditioned vault for 40 years before retrieving it.

      Any takers on the coin?

  • All of their products would cost infinity BTC!

  • No shit? (Score:5, Insightful)

    by Baron_Yam ( 643147 ) on Tuesday December 14, 2021 @09:52PM (#62081395)

    Regular wealth tokens are generally backed by a valuable material or a stable government's promise. Things that aren't perfectly reliable, but far more reliable than necessary for most purposes - if you have trouble with your currency's value, you've likely had a lot of warning signs long before a problem.

    Crypto, though, is entirely floated on speculation. That's it. There is nothing behind it to guarantee value. There IS something behind it guaranteeing a cost, and there are plenty of things related to it limiting utility and stability though.

    It'll probably stick around like other ponzis that just won't die, but chances are pretty good at some point the fad will pass and when that happens the floor will drop out from under all the coins and the market will shrink down to a tiny fraction of the fools and scammers that currently occupy it.

    • Can you explain to me how valuable gold's country is at some safe deep in the ground in some other country (or even its own)?
      Can you tell me who, today (not 100 years ago), is interested in exchanging goods for gold?

      Cryptocurrencies are as useful as gold is because they actually meet the same exact requirements of gold to store value in something of limited quantity that is not controlled by some politician and it doesn't change over time, that is, perpetual.

      The value of gold is pure speculation as w
      • Gold is consumed in the Pharmaceutical, high tech industries and host of other hard to substitute situations. Not to mention India and China both buy plenty of gold for jewelry and investment.

      • Historically it's much more useful to say that fiat money's value, in terms of gold, is speculation.

        Gold has been used as a store of wealth (not necessarily a means of exchange) for millenia, in all civilizations in which it was known, including our own.

  • Are you saying that all that hard work will be for naught? Are you saying that value has been alienated from labor? Will you not accept proof of our endeavours?

    • Re:What about proof of work? (Score:5, Insightful)

      by xalqor ( 6762950 ) on Tuesday December 14, 2021 @10:47PM (#62081495)

      You're kidding, right?

      Proof of work is a clever way for multiple independent nodes to decide who gets to write the next block in the chain. It's a consensus mechanism, nothing more. The only value in the work of solving the next hash puzzle is the reward the solving node can issue to itself in that next block which can be easily verified by other nodes. It's ephemeral.

      But as we found out, when so many people are trying to make money with cryptocurrency, proof of work is not an environmentally friendly mechanism. Other than the associated pollution making it less attractive to conscientious people, proof of work has nothing to do with the value of a cryptocurrency that uses it.

      I don't know if the value of all these cryptocurrencies will eventually drop to zero, because you only need a few people to still be using it for it to have a non-zero value. But it will drop significantly when some of all of these things happen:

      Enough people realize that there are better ways to make decentralized and private digital payments and switch to that instead.

      When enough criminals realize their supposedly private transactions have been exposed or can be exposed and become an undeniable public record that can be used against them in a court of law.

      When governments ban it heavily tax proof of work cryptocurrencies to protect the environment.

      When governments regulate or ban cryptocurrencies to protect all the future suckers from pump and dump, wash sales, false advertising, non-insured deposits, criminal negligence of exchange operators, and other issues.

      When the hype artists move on to greener pastures.

  • Can't wait for cheap bitcoins.

  • Derivatives will inevitably slow (and reverse) the fall of bitcoin.
    If XBT was dropping too much, not only random joes would sell, bears would short it 125x leverage, this will increase supply thus reducing the price.
    Once the price falls enough, and everyone is shorting, there will be people with almost no collateral, meaning any movement upwards would liquidate their collateral to close their position. This will create buy pressure in the market (since bitcoin must be bought to close a short) increasing the

    • Re: (Score:3)

      by ceoyoyo ( 59147 )

      Or the US government makes it illegal to exchange US dollars for it.

      • XBT would certainly take a big dump, but since when do private citizens care what the government says you can or can't exchange their toilet paper for?
        Also XMR is proof that you don't need government approval.

    • Re: (Score:3)

      by gweihir ( 88907 )

      All it needs is for mining to be outlawed. And that _will_ happen eventually.

  • People hate government as onerous, spies on people, violate privacy etc etc. But, in the end, when there is a dispute, if you need to sue someone to enforce a contract, you need to rely on the good old government however much the cryptofans hate it.

    And the dislike is mutual, government does not like people moving wealth around without paying taxes. So it has no incentive to actually resolve disputes or enforce contracts. If crypto can not help government track tax dodgers and criminals, even if you strong

  • They printed ~800,000,000,000 pounds since 2008 and wonder why investors are moving to crypto.

  • If the price were to drop to near zero, I will buy all the bitcoin in the world for ONE DOLLAR. Now it is worth at LEAST a dollar. CHECK. AND. MATE.

    But in all seriousness, given the importance of bitcoin to the history of crypto currency, I could see it being worth something as a historical artifact. Unless every private key were made public, then I guess that would make it worthless. But that seems even less likely than the price dropping below $100.

    • I don't understand his reasoning though. He says that the scarcity (the fact that you can't make anymore bitcoin after a certain point) is what will ultimately cause Bitcoin to be valueless. I don't understand how that could work at all.

    • Re:Proof that he is wrong (Score:5, Insightful)

      by gweihir ( 88907 ) on Wednesday December 15, 2021 @07:40AM (#62082315)

      You forgot how BC works. Or you never understood it in the first place.

      If the value of BC drops to zero, you cannot sell or buy it anymore because nobody will do any mining and that means no transactions.

  • "could become"

    No one is required to accept/use Bitcoin and to people that won't, it's already worthless. For the rest, try using it when the power/internet is out, then try cash -- no blockchain required.

  • Its completely correct that bitcoin isn't based on some tangible commodity, and so could become worthless. That probably has a much higher probability than say gold becoming worthless. What is not clear is how that probability compares to existing currencies - which in principal can also become worthless.

    • No, in principle most currencies cannot become worthless unless all the people died. In which case it would simply have undefined value.

      You're just using loose thinking to say that things with very little similarity have some similarity and so are the same.

      Weak sauce. Do better, or get off my lawn.

  • but not much. For the longest time, it was close to zero, but eventually after a hundred plus years, some collectors drove up the price.

    • Never thought about this. My dad use to collect currency but mostly old coins. Seems like it would be a cool piece to have. However, I really wonder how they authenticate these kinds of currencies.

  • Like the british pound

    Talk about the pot calling the kettle black.

    https://www.statista.com/stati... [statista.com]

    Issuing paper currencies is a licence to steal. And steal they do.

    • Re: (Score:2)

      by ledow ( 319597 )

      Allow me to introduce the concept of inflation.

      That graph, just by the axis chosen, HAS to drop down to one. Do it for any other currency, exactly the same.

      As a mathematician who isn't even particularly averse in statistics and economics, I'm pissing myself that you used that as an example.

      And it goes back to 1209 for a reason. The pound sterling, apart from decimalisation modifications, has been around in that form since then. The inflation from 1209 to now for ANYTHING is ridiculous and even 2000 times

  • Absolutely nothing backs crypto but hope. It's modern day beanie babies.

    Anyone that thinks this is going to have value in 2030 is insane. It's not. It's backed by nothing. Maybe the drug trade?

    Here's where it gets fun. How do you short crypto? Even people against it can't fight it like normal stocks. In normal markets you can actually short ownership. This bubble is going to burst and when it does it is going to be EPIC! There is no regulatory agency that can't stop trading when it goes from god kn

  • There's another question ignored by these opinions .. is there demand for what bitcoin does (outside speculation)? and the answer is obviously yes, especially for people with untrustworthy or dictatorial governments. In these circumstances, bitcoin provides a real and useful service (ability to transact without the involvement of said untrustworthy government).

    • There's another question ignored by these opinions .. is there demand for what bitcoin does (outside speculation)? and the answer is obviously yes, especially for people with untrustworthy or dictatorial governments. In these circumstances, bitcoin provides a real and useful service (ability to transact without the involvement of said untrustworthy government).

      Is it possible to provide better options for that demand? When that better option comes along, who will still use bitcoins?

  • Yes, and one dollar = one dollar.

    Itâ(TM)s only useful for the same reason it was a thousand years ago: the âoekingâ issued it and said âoepay your taxes with this or else Iâ(TM)ll have you killedâ.

  • They missed out, and are trying to drive down the price so they can get in cheap.
  • ...has ever gone to zero value.
  • Be the Winklevoss twins or Elon Musk. Then you can just tweet or do something in the press and watch as all the dancing monkeys buy or sell on your command and you do the opposite. Rinse and repeat until these idiots eventually learn or the bottom falls out, either way you're long gone by that time. Everyone else... not so much.

  • But I don't see the current muppets running the BoE (current track record of correctly anticipating the economy: zero) asking their PR department to release a statement about that. And, frankly, the Turkish Lira is in considerably more danger than Bitcoin is at the moment.

    Bitcoin's problems are technical, not some sort of abstract notion of what defines "real" money.

    Ask them what's real about the money the BoE has used to buy £840Bn worth of bonds in order to keep the zombie banks afloat - sorry, in o

  • Well, it already is (Score:4, Insightful)

    by gweihir ( 88907 ) on Wednesday December 15, 2021 @07:20AM (#62082263)

    It has no practical use. The only ones willing to pay for it are "greater fools". If enough of these wake up or run out of money, BC reverts to its intrinsic value, which is zero.

  • Will not Could (Score:3)

    by Martin S. ( 98249 ) on Wednesday December 15, 2021 @08:41AM (#62082419) Journal

    The BoE is looking at Bitcoin as the pyramid scheme it is. However there will be a time when Bitcoin becomes worthless and the rapidly increasing power of Quantum devices brings it closer every day.

Slashdot Top Deals

Understanding is always the understanding of a smaller problem in relation to a bigger problem. -- P.D. Ouspensky

Close