A dire warning about bitcoin has been issued by the Bank of England, saying the cryptocurrency may soon be “worthless”.
Bitcoin owners have been told to prepare to lose everything, with the Bank of England warning that the cryptocurrency may soon become “worthless”.
The bank elaborated on the risks for investors as the value of bitcoin rose to around $70,000 this year. It peaked in early November but has stabilized in recent weeks.
Sir John Cunliffe, deputy governor of the Bank of England, said the banking industry needs to be prepared for the risks of the currency as it becomes more popular.
“Their price can vary greatly and [bitcoins] could fall to zero theoretically or practically,” he told the BBC.
In an online post published on the bank’s website, it said that leading institutions should take a cautious approach to adopting crypto assets.
“Advanced regulatory and law enforcement frameworks, both domestically and globally, are necessary to influence growth in these rapidly growing markets, manage risk, encourage sustainable innovation, and maintain widespread trust and integrity in the financial system, “It said. ,
In the UK the bank is lobbying for stricter regulations for cryptocurrency.
In a separate blog post, a member of the bank’s staff wrote that bitcoin failed to meet many of the features required for the currency and that it inherently risks becoming volatile.
“The problem is that, unlike traditional forms of money, bitcoin is not used to price things other than itself,” wrote Thomas Belsham, who works in the bank’s stakeholder and media engagement division.
“As bitcoiners themselves are fond of saying, ‘one bitcoin = one bitcoin.’ But a tautology does not make a currency.”
That said, the scarcity of bitcoin – which has been capped at 21 million – was one of the highlights for investors.
However, Mr Belsham added the feature could “ultimately, render bitcoin worthless as well”. There are currently about 19 million bitcoins in circulation.
“Simple game theory tells us that a process of backwards induction will, in fact, at some point, prompt smart money to exit. And if that happens, investors will be prepared to lose everything.” After all, ”said Mr. Belsham.