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Bitcoin could become ‘worthless’, Bank of England warns

37 points by 1cvmask 5y ago

1cvmask 5y ago
I wonder when and if they will pass an act outlawing or “regulating” bitcoin/crypto like that was passed for gold in 1934: https://en.wikipedia.org/wiki/Gold_Reserve_Act https://en.wikipedia.org/wiki/Gold_Reserve_Act Hillary Clinton talks about how crypto is a threat to currencies and especially to the dollar as a reserve currency (minute 29:30): https://www.bloomberg.com/news/videos/2021-11-19/great-power-competition-the-emerging-world-order-video https://www.bloomberg.com/news/videos/2021-11-19/great-power...
- KptMarchewa 5y ago
  Can't wait for this.
  - md_ 5y ago
    Or at least outlaw talking incessantly about it. It'd make online communities so much more pleasant. ;) Like, if you want to post about BTC more than five times an hour, you first have to take an undergraduate class in cryptography and economics. Ten times an hour? You can't use "crypto" to mean "cryptocurrency."
Synaesthesia 5y ago
Bitcoin is a huge bubble, being driven up by speculation and some rather dodgy stablecoins. It's hard to say how long it will be able to sustain it's price, but if that bubble pops it could bring down the entire economy.
- meltedcapacitor 5y ago
  Or it could act as economic stimulus, as the exit dollars get invested in productive endeavours, rekt coiners have to get a job, and electricity and electronics become cheaper due to the capacity being freed from cryptomining.
  - zwirbl 5y ago
    Don't let a crisis go to waste
  - lvl100 5y ago
    You are assuming everyone can get out at the same time at price X. That’s not going to happen. Generally in crashes/drawdowns, 2/3 will see 1/3 of the price in liquidation.
    - KptMarchewa 5y ago
      He mentioned >rekt coiners have to get a job
  - jack_pp 5y ago
    As mining bitcoin is only worthwhile with ASICS there will be no flood of electronics entering the market at low prices, being used for something more "worthwhile". You could argue this is a feature and not a bug. I, as many people before me, thought about a cryptocurrency with a "useful" PoW like protein folding but if you would create such a thing it would be very susceptible to attack by govt or any big private actor because if you could mine cryptocurrency with general hardware then acquiring said hardware for an attack has 0 cost. You could acquire hardware for the attack, crash the currency then just use it for the protein folding. So the fact that the mining hardware can't be used for anything else is a feature which makes bitcoin more secure against attack.
    - em3rgent0rdr 5y ago
      The input resources used to create ASICs still would become available to be used to create other electronics, including other types of ASICs.
magma1983 5y ago
Also it could become useful.
- esarbe 5y ago
  Could it? How? I'm honestly curious because I don't see how Bitcoin could be useful.
  - authed 5y ago
    It is being used to transfer money in other countries to avoid the fiat shit show.
    - bottled_poe 5y ago
      “the fiat shit show” - aka taxes and other laws.
      - authed 5y ago
        I was talking about artificial delays, high fees and things like that... You can have very low fees and near instant transfers with some Cryptos.
    - killertcell 5y ago
      >avoid the fiat shit show it has its shitshow of its own - see $actual_crypto_exchange_busted
    - bwb 5y ago
      I will admit this is useful, although the fluctuations is a PITA and if you can do GUSD it is better. I've done this to pay contractors in Brazil and other places with high banking fees.
  - Mhaea 5y ago
    as a currency , again
  - sebastianconcpt 5y ago
donatj 5y ago
Bitcoin just like any other currency, is worth exactly what people think it is worth. The entire financial system is basically a collective delusion of sorts. Any currency can become worthless as faith in it drops out.
- RobertoG 5y ago
  If you demand a currency to pay taxes and fines, there is always going to be people that need to acquire it.
- zwirbl 5y ago
  This is often repeated, but it always ignores that there are state-level actors (often called a "state") propping up currencies, often supported by central banks. In this regard Bitcoin is definitely not "like any other currency". This is by no means exhaustive, there are a myriad of differences
  - imaginator 5y ago
    Zimbabwe has entered the room. Also had a central bank before the last round of hyperinflation/reset. One could argue that the lack of a central bank is a feature. What other differences would would you imagine distinguish bitcoin from central bank currencies?
    - kergonath 5y ago
      “One state is doing terribly” (or even a handful of them, before someone mentions the Weimar republic) really is not equivalent to “it is impossible for a state to do it well”.
  - deleted 5y ago
    [deleted]
- bwb 5y ago
  Caveat, national currencies are secured with economic power, a system of law, culture, military power, etc etc. It is a bit different. They aren't perfect either but there is more supporting what people "think" they are worth here. Bitcoin has it own culture and history, but it is still a baby. I do think bitcoin is a bit more like Gold, although Gold has real uses so that is still a bit of a rough comparison.
TheBlight 5y ago
Central bank fearmongers over decentralized currency that could potentially undermine its existence.
- m4r35n357 5y ago
  So awful it makes the Banks look like the good guys in comparison.
- flyinglizard 5y ago
  It’s much more likely the central bank is worried for the stability of the UK banking system in case of a Bitcoin collapse than Bitcoin somehow making the monetary system redundant.
sebastianconcpt 5y ago
TL;DR: Bitcoin fundamental value is scarcity, hence we think it can theoretically be worthless in the long run. What's surely worthless is reading that article.
impulser_ 5y ago
I think these central banks really underestimate the Bitcoin maximalists. These people will hold and buy Bitcoin for the rest of their lives. Half of all Bitcoin hasn't been moved in 2+ years, despite multiple -50% moves. The price went from 20k to 2k and most wallets didn't even have a coin move from it.
- KptMarchewa 5y ago
  Let them hold all the way to zero.
  - dave_sullivan 5y ago
    If bitcoin keeps dropping 50% every week for the next 5 years, it still won't be zero. And every 50% drop, someone's thinking "Now could I double my money?" I dunno, there are feedback mechanisms that could keep this thing alive for a long time. And if not BTC then certainly some crypto based on the concepts.
    - hawk_ 5y ago
      > 50% every week for the next 5 years That's 1/2 pow 52*5! There are not enough atoms in the universe to sustain such a fall.
    - KptMarchewa 5y ago
      >someone's thinking "Now could I double my money?" You could always try to find the bigger fool unless you block the conversion between crypto and real money. Anyway, this kind of schemes always come crashing down. There will be not a lot of people willing to catch a falling knife after some point.
    - klodolph 5y ago
      If you owned the entire US, some $270 trillion in assets, and your position decreased in value 50% each week, after one year, you’d have just enough left to play one game at the nickel arcade… but not two. At some point you have to round something to zero.
vorhemus 5y ago
I see Bitcoin closer to the art market then to gold or a currency. There is de facto no universal rule for pricing a work of art other than what someone is willing to pay for it at auctions. As long as everyone assumes that artworks will be sold more expensive in the future and no one sells below the purchase price, the prices will rise - provided that the interest in it remains upright.
- klodolph 5y ago
  Obviously not everyone assumes that Bitcoin will be more valuable in the future.
- ghiculescu 5y ago
  I’ve heard this metaphor lots and find it super confusing. The price of art is still based on something - some art looks nice, or was made by someone famous.
  - md_ 5y ago
    Hmm, I don't fully buy the metaphor (since BTC are fungible), but I do think it exhibits collector economics. I'm in many ways an art fan, but art pricing is totally irrational: 1. Prints cost substantially less than paintings since they're less limited 2. Prints price based on lots of intangibles (how limited the series is, what series it was, what the artist's role was in it, etc) 3. Fundamentally, I don't think buyers get that much more pleasure from an original than from a print or authorized reproduction 4. Many buyers loan their purchases to a museum (which has tax advantages) or keep them in free ports or similar, where they can't visit them in person The really high end market (i.e. million dollar+ art market) is really clearly speculative a lot of the time. Or the pleasure is "I like owning this", not "I like looking at this', which is itself hard to sever from the speculative value.
    - MerelyMortal 5y ago
      FYI, BTC is not fungible. Otherwise companies like Coinbase wouldn't be able to ban people's accounts if they transfered in BTC with a tainted history.
mojuba 5y ago
While it's still debatable whether crypto currencies are pure speculation vs. the new "gold" vs. a new currency that will kill the national ones - As a philosophical idea, can we at least agree that the inherent value of Bitcoin and the fundamental reason some people invest in it is... the beauty of mathematics?
- em3rgent0rdr 5y ago
  US Currency says "In God we trust." Bitcoin says "In Math we trust."
- tromp 5y ago
  > the fundamental reason some people invest in it is... the beauty of mathematics? Bitcoin is full of ugly warts though. While some other coins featuring much more beauty (simplicity and elegance) are near worthless. Furthermore, most people speculating on bitcoin have a very limited understanding of the mathematics underlying bitcoin...
  - mojuba 5y ago
    Understanding the underlying math is not required really. You may just believe crypto is pure math and its beautiful as such. Like, personally I don't fully understand it - never bothered to study tbh.
- Ekaros 5y ago
  Some people sure, but I'm not sure how big majority that still is. I believe currently it's value is greater fool theory. Those who value it for mathematics, would likely value the state of the art cryptocurrencies more. As BTC really isn't any way special outside being the first one.
  - mojuba 5y ago
    I wasn't clear, sorry. I'm not saying people may be investing because they appreciate the math. It's not about the motivation as much as it's about reconciliation, or let's say finding the common denominator in debates. On some abstract philosophical level we can all agree that because crypto currencies are pure math they are beautiful as such. Knowingly or not, people invest and trade the power and beauty of mathematics. Just a neat meta-idea, that's all.
ashwagary 5y ago
Bitcoin 'could'... but GBP & USD 'will' become worthless, guaranteed.
- ashwagary 5y ago
  Downvoters don't realize that all fiat currencies go to zero in less than 100 years. This knowledge should be more common.
peter-m80 5y ago
I'm tired of hearing this same statements... since bitcoin value was less than $100.

37 points by 1cvmask 5y ago

I wonder when and if they will pass an act outlawing or “regulating” bitcoin/crypto like that was passed for gold in 1934: https://en.wikipedia.org/wiki/Gold_Reserve_Act https://en.wikipedia.org/wiki/Gold_Reserve_Act Hillary Clinton talks about how crypto is a threat to currencies and especially to the dollar as a reserve currency (minute 29:30): https://www.bloomberg.com/news/videos/2021-11-19/great-power-competition-the-emerging-world-order-video https://www.bloomberg.com/news/videos/2021-11-19/great-power...

KptMarchewa 5y ago
Can't wait for this.
- md_ 5y ago
  Or at least outlaw talking incessantly about it. It'd make online communities so much more pleasant. ;) Like, if you want to post about BTC more than five times an hour, you first have to take an undergraduate class in cryptography and economics. Ten times an hour? You can't use "crypto" to mean "cryptocurrency."

Synaesthesia 5y ago

Bitcoin is a huge bubble, being driven up by speculation and some rather dodgy stablecoins. It's hard to say how long it will be able to sustain it's price, but if that bubble pops it could bring down the entire economy.

meltedcapacitor 5y ago
Or it could act as economic stimulus, as the exit dollars get invested in productive endeavours, rekt coiners have to get a job, and electricity and electronics become cheaper due to the capacity being freed from cryptomining.
- zwirbl 5y ago
  Don't let a crisis go to waste
- lvl100 5y ago
  You are assuming everyone can get out at the same time at price X. That’s not going to happen. Generally in crashes/drawdowns, 2/3 will see 1/3 of the price in liquidation.
  - KptMarchewa 5y ago
    He mentioned >rekt coiners have to get a job
- jack_pp 5y ago
  As mining bitcoin is only worthwhile with ASICS there will be no flood of electronics entering the market at low prices, being used for something more "worthwhile". You could argue this is a feature and not a bug. I, as many people before me, thought about a cryptocurrency with a "useful" PoW like protein folding but if you would create such a thing it would be very susceptible to attack by govt or any big private actor because if you could mine cryptocurrency with general hardware then acquiring said hardware for an attack has 0 cost. You could acquire hardware for the attack, crash the currency then just use it for the protein folding. So the fact that the mining hardware can't be used for anything else is a feature which makes bitcoin more secure against attack.
  - em3rgent0rdr 5y ago
    The input resources used to create ASICs still would become available to be used to create other electronics, including other types of ASICs.

magma1983 5y ago

Also it could become useful.

esarbe 5y ago
Could it? How? I'm honestly curious because I don't see how Bitcoin could be useful.
- authed 5y ago
  It is being used to transfer money in other countries to avoid the fiat shit show.
  - bottled_poe 5y ago
    “the fiat shit show” - aka taxes and other laws.
    - authed 5y ago
      I was talking about artificial delays, high fees and things like that... You can have very low fees and near instant transfers with some Cryptos.
  - killertcell 5y ago
    >avoid the fiat shit show it has its shitshow of its own - see $actual_crypto_exchange_busted
  - bwb 5y ago
    I will admit this is useful, although the fluctuations is a PITA and if you can do GUSD it is better. I've done this to pay contractors in Brazil and other places with high banking fees.
- Mhaea 5y ago
  as a currency , again
- sebastianconcpt 5y ago

donatj 5y ago

Bitcoin just like any other currency, is worth exactly what people think it is worth. The entire financial system is basically a collective delusion of sorts. Any currency can become worthless as faith in it drops out.

RobertoG 5y ago
If you demand a currency to pay taxes and fines, there is always going to be people that need to acquire it.
zwirbl 5y ago
This is often repeated, but it always ignores that there are state-level actors (often called a "state") propping up currencies, often supported by central banks. In this regard Bitcoin is definitely not "like any other currency". This is by no means exhaustive, there are a myriad of differences
- imaginator 5y ago
  Zimbabwe has entered the room. Also had a central bank before the last round of hyperinflation/reset. One could argue that the lack of a central bank is a feature. What other differences would would you imagine distinguish bitcoin from central bank currencies?
  - kergonath 5y ago
    “One state is doing terribly” (or even a handful of them, before someone mentions the Weimar republic) really is not equivalent to “it is impossible for a state to do it well”.
- deleted 5y ago
  [deleted]
bwb 5y ago
Caveat, national currencies are secured with economic power, a system of law, culture, military power, etc etc. It is a bit different. They aren't perfect either but there is more supporting what people "think" they are worth here. Bitcoin has it own culture and history, but it is still a baby. I do think bitcoin is a bit more like Gold, although Gold has real uses so that is still a bit of a rough comparison.

TheBlight 5y ago

Central bank fearmongers over decentralized currency that could potentially undermine its existence.

m4r35n357 5y ago
So awful it makes the Banks look like the good guys in comparison.
flyinglizard 5y ago
It’s much more likely the central bank is worried for the stability of the UK banking system in case of a Bitcoin collapse than Bitcoin somehow making the monetary system redundant.

sebastianconcpt 5y ago

TL;DR: Bitcoin fundamental value is scarcity, hence we think it can theoretically be worthless in the long run. What's surely worthless is reading that article.

impulser_ 5y ago

I think these central banks really underestimate the Bitcoin maximalists. These people will hold and buy Bitcoin for the rest of their lives. Half of all Bitcoin hasn't been moved in 2+ years, despite multiple -50% moves. The price went from 20k to 2k and most wallets didn't even have a coin move from it.

KptMarchewa 5y ago
Let them hold all the way to zero.
- dave_sullivan 5y ago
  If bitcoin keeps dropping 50% every week for the next 5 years, it still won't be zero. And every 50% drop, someone's thinking "Now could I double my money?" I dunno, there are feedback mechanisms that could keep this thing alive for a long time. And if not BTC then certainly some crypto based on the concepts.
  - hawk_ 5y ago
    > 50% every week for the next 5 years That's 1/2 pow 52*5! There are not enough atoms in the universe to sustain such a fall.
  - KptMarchewa 5y ago
    >someone's thinking "Now could I double my money?" You could always try to find the bigger fool unless you block the conversion between crypto and real money. Anyway, this kind of schemes always come crashing down. There will be not a lot of people willing to catch a falling knife after some point.
  - klodolph 5y ago
    If you owned the entire US, some $270 trillion in assets, and your position decreased in value 50% each week, after one year, you’d have just enough left to play one game at the nickel arcade… but not two. At some point you have to round something to zero.

vorhemus 5y ago

I see Bitcoin closer to the art market then to gold or a currency. There is de facto no universal rule for pricing a work of art other than what someone is willing to pay for it at auctions. As long as everyone assumes that artworks will be sold more expensive in the future and no one sells below the purchase price, the prices will rise - provided that the interest in it remains upright.

klodolph 5y ago
Obviously not everyone assumes that Bitcoin will be more valuable in the future.
ghiculescu 5y ago
I’ve heard this metaphor lots and find it super confusing. The price of art is still based on something - some art looks nice, or was made by someone famous.
- md_ 5y ago
  Hmm, I don't fully buy the metaphor (since BTC are fungible), but I do think it exhibits collector economics. I'm in many ways an art fan, but art pricing is totally irrational: 1. Prints cost substantially less than paintings since they're less limited 2. Prints price based on lots of intangibles (how limited the series is, what series it was, what the artist's role was in it, etc) 3. Fundamentally, I don't think buyers get that much more pleasure from an original than from a print or authorized reproduction 4. Many buyers loan their purchases to a museum (which has tax advantages) or keep them in free ports or similar, where they can't visit them in person The really high end market (i.e. million dollar+ art market) is really clearly speculative a lot of the time. Or the pleasure is "I like owning this", not "I like looking at this', which is itself hard to sever from the speculative value.
  - MerelyMortal 5y ago
    FYI, BTC is not fungible. Otherwise companies like Coinbase wouldn't be able to ban people's accounts if they transfered in BTC with a tainted history.

mojuba 5y ago

While it's still debatable whether crypto currencies are pure speculation vs. the new "gold" vs. a new currency that will kill the national ones - As a philosophical idea, can we at least agree that the inherent value of Bitcoin and the fundamental reason some people invest in it is... the beauty of mathematics?

em3rgent0rdr 5y ago
US Currency says "In God we trust." Bitcoin says "In Math we trust."
tromp 5y ago
> the fundamental reason some people invest in it is... the beauty of mathematics? Bitcoin is full of ugly warts though. While some other coins featuring much more beauty (simplicity and elegance) are near worthless. Furthermore, most people speculating on bitcoin have a very limited understanding of the mathematics underlying bitcoin...
- mojuba 5y ago
  Understanding the underlying math is not required really. You may just believe crypto is pure math and its beautiful as such. Like, personally I don't fully understand it - never bothered to study tbh.
Ekaros 5y ago
Some people sure, but I'm not sure how big majority that still is. I believe currently it's value is greater fool theory. Those who value it for mathematics, would likely value the state of the art cryptocurrencies more. As BTC really isn't any way special outside being the first one.
- mojuba 5y ago
  I wasn't clear, sorry. I'm not saying people may be investing because they appreciate the math. It's not about the motivation as much as it's about reconciliation, or let's say finding the common denominator in debates. On some abstract philosophical level we can all agree that because crypto currencies are pure math they are beautiful as such. Knowingly or not, people invest and trade the power and beauty of mathematics. Just a neat meta-idea, that's all.

ashwagary 5y ago

Bitcoin 'could'... but GBP & USD 'will' become worthless, guaranteed.

ashwagary 5y ago
Downvoters don't realize that all fiat currencies go to zero in less than 100 years. This knowledge should be more common.

peter-m80 5y ago

I'm tired of hearing this same statements... since bitcoin value was less than $100.