Andrew Bailey, the Governor of the Bank of England, said that people who invest in crypto should prepare themselves to lose all their money. Because, in his opinion, cryptocurrencies do not have any intrinsic value.
Digital currencies like Ether, bitcoin and dogecoin began to change dramatically this year. It was a reminder for some investors who started investing in the 2017 crypto bubble that the situation might change. From the beginning, bitcoin was $20,000, and a year later sink as low as $3,123.
On Thursday, at a press conference about the rise of the value of cryptocurrencies, Bailey said that cryptocurrencies have no intrinsic value. He clarified that he didn’t mean that people don’t value crypto because they can have extrinsic value. After all, they have no intrinsic value.
He again explained himself, saying that people should continue to buy them only if they are ready to lose all their money.
Bailey’s comments had similarities with the warning from the Financial Conduct Authority of the U.K.
In January, the financial services watchdog said investing in crypto assets involves very high risks with investors’ money. He added that if consumers invest in these products, they should prepare themselves to lose all their money.
Bailey, formerly the chief executive of the FCA, has been a skeptic of crypto for a long time. In 2017, he warned people that if they want to invest in bitcoin, they should also be prepared to lose all their money.
The Value of Bitcoin
Bitcoin is rising over 90% this year, resulting from the increasing interest from institutional investors and corporate buyers like Tesla. The electric car company bought about $1.5 billion worth of bitcoin this year. Since then, its holdings have risen to about $2.5 billion.
Some people argue that cryptocurrency can hedge against inflation as central banks worldwide print money to relieve coronavirus-battered economies.
However, skeptics see bitcoin as a market bubble that might burst. The chief investment strategist at Bank of America Securities, Michael Hartnett, said that bitcoin’s rally seems like the central bubble. At the same time, Stephen Isaacs from Alvine Capital said that there are no fundamentals with this product.
Although, alternative digital currencies made even more significant gains than bitcoin. For example, Ether received returns of more than 370% this year. Besides that, meme-inspired crypto dogecoin is reaching 12,600%.