Bank of England Governor Andrew Bailey has once again issued a warning against cryptocurrencies and Bitcoin by “reiterating” that they have no intrinsic value. At a Bank of England event, he stated:
“You’ve probably seen all the stories about the price of bitcoin, share prices in the U.S. suddenly rocketing up for companies that nobody quite knows what they do. That’s a warning sign. People are looking for investment opportunities. Buy it if you want but it has no intrinsic value”.
This is not the first time he has issued such a warning. Andrew Bailey already stated something similar last week:
“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. Buy them only if you’re prepared to lose all your money”.
These words were uttered at a Bank of England press conference last weekend.
Already in January, he issued another warning. According to the governor, those who invest in cryptocurrencies must be prepared to take very, very big risks:
“Investing in cryptoassets, or investments and lending linked to them, generally involves taking very high risks with investors’ money. If consumers invest in these types of product, they should be prepared to lose all their money”.
The Bank of England’s well-founded and unfounded fears about cryptocurrencies
These sentences tell a partial truth: those who invest in cryptocurrencies should not be prepared to lose everything but should know that it is still a high-risk investment. In fact, cryptocurrencies are subject to strong volatility, to the point that upward excursions are often followed by downward swings.
This is the case of Shiba Inu, to make an example. In recent days, following the listing on Binance, the cryptocurrency that claims to be the Dogecoin Killer has risen by 1000%. So-called “early investors”, those who entered in the early days, have certainly benefited. On the contrary, those who entered at the moment of hype, ran into a 40% drop probably caused by Vitalik Buterin’s maxi donation to India’s Crypto Covid Relief Fund.
This is not to say that those who invest in cryptocurrencies lose, but those who do invest should definitely use caution, because volatility can do a lot of harm. That is why saying that “you lose everything” is not correct. But it is fair to say that before investing you need to study each project and not just get carried away by the hype or FOMO.
A CBDC for the UK
Anyway, Andrew Bailey also gave very important news about “cryptocurrencies”. The Bank of England could issue its own digital currency, within a few years:
“It may well be that we do end up with a digital currency. It’s a few years off at the moment”.
The point, the governor explained, is that you have to be very careful about issues such as security and privacy. Especially if they are in the hands of a centralized entity, which is what distinguishes CBDCs from real cryptocurrencies.