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- A Nobel Prize-winning economist predicts doom for Bitcoin and claims the asset will be worthless in the next 10 years.
- His reason is based on the narrative that no central authority backs Bitcoin and is purely based on speculation and demand.
The attacks on Bitcoin (BTC) seem to have rekindled as Nobel prize-winning economist Eugene Fama criticizes the fundamentals of the digital asset. Identified as the “father of modern finance,” Fama believes that Bitcoin would eventually fail and probably become worthless in a decade.
Reasons for His Assertion
Defending his position in an interview with Luigi Zingales and Bethany McLean on the Capitalisnt podcast, Fama explained that Bitcoin is valueless. According to him, the purported use case as a medium of exchange is only theoretical, as Bitcoin fails to adequately facilitate buying and selling. Additionally, he believes that Bitcoin does not fit into the existing banking system.
Shedding more light on this, Fama pointed out that currencies must be stable to become a medium of exchange seamlessly. However, Bitcoin is extremely volatile, creating inconsistencies around its value and making it highly unpredictable.
On another note, Fama highlighted that Bitcoin lacks the backing of a central authority. This implies that the asset thrives on speculations and derives its value from demand. Economically, a complete breakdown of demand would see the asset crashing down to zero.
Responding to his assertion, several crypto key players have dismissed Fama’s argument as they explain that Bitcoin’s use cases transcend beyond being a mere currency. According to experts, Bitcoin has evolved to become digital gold. Its 21 million supply creates scarcity around the asset and makes it deflationary. Most importantly, it is seen as an inflationary hedge that follows the trajectory of gold.
Experts Who Criticized Bitcoin in the Past
In 2017, one of the greatest investors, Warren Buffett, described Bitcoin as far from being a value-producing asset. In 2019, he referred to Bitcoin as a delusion and claimed that it attracted Charlatans. In 2024, he predicted that Bitcoin could witness a bad ending.
In a 2021 news story covered by CNF, JPMorgan’s Jamie Dimon was also reported to have labeled Bitcoin as worthless. Similarly, an American actor and author, Ben McKenzie, described Bitcoin in his book (Easy Money) as a financial bubble. According to him, Bitcoin highlights the prevalence of fraud in the Industry. Joining this list is the president of the European Central Bank (ECB), Christine Lagarde.
Responding to the calls to add Bitcoin to the European reserves, Lagarde emphasized that the asset would not enter the reserves of any of the General Council. According to her, the reserves of Central Banks have to be liquid, secure, and safe. Meanwhile, the Czech Republic has approved a proposal to explore the integration of Bitcoin into its reserves. As summarized in our earlier news story, 5% of the CNB’s €140 billion was proposed to be allocated to Bitcoin.
Several countries, including the US, are also reported to be integrating Bitcoin into their strategic reserves. As mentioned in our previous discussion, multiple US States have already reached an advanced stage in this initiative.
At press time, Bitcoin was trading at $95k after declining by 3% in the last 24 hours.
