Bitcoin is under fire once again. This time, the former president of one of the world’s most important monetary authorities — the European Central Bank (ECB) — has called out the cryptocurrency industry, bashing what he sees as flaws in the digital asset markets.
The flaw in question: the financial speculation side of the Bitcoin industry.
Bitcoin Speculation Should End, Financial Incumbents Assert
Like it or not, many don’t put money into the cryptocurrency markets to make a statement to central banks and governments or because they think fiat is doomed; people put money in Bitcoin and its ilk to speculate, to hopefully turn a profit by throws craps at the crypto table. Look simply to the frequency of mentions of cryptocurrency in the mainstream media, which is undoubtedly tied to price action.
While there is nothing wrong with this per se, financial incumbents, for some reason, aren’t all too happy with the trend of speculation in cryptocurrency.
Speaking at a conference in Beijing hosted by Chinese media group Caixin, Jean-Claude Trichet, who led the ECB from 2003 to 2011 after heading the Bank of France, said that investing cryptocurrencies is “in many respects pure speculation.” Trichet added that this speculation isn’t healthy, looking to the fact that he sees little fundamental value in Bitcoin — something he called “not real” and noted is sans “the characteristics that a currency must have.”
The former ECB chief is far from the first representative of traditional finance to have pushed such sentiment.
Legendary billionaire investor Warren Buffett told Yahoo! Finance in an interview last year that Bitcoin is anything but an investment, but rather speculation. He said:
If you buy something like bitcoin or some cryptocurrency, you don’t have anything that is producing anything… You’re just hoping the next guy pays more. And you only feel you’ll find the next guy to pay more if he thinks he’s going to find someone that’s going to pay more.
Buffett asserted that real investment is when an investor allocates capital towards something that has inherent value — something that the businessman says Bitcoin is clearly devoid of. While many in the cryptocurrency space would beg to differ, the 89-year-old investor has been touting this line for years. Seeing that he still owns and uses a flip phone, this is unlikely to change any time soon.
The former chief executive of Nasdaq, too, has made this assertion. Speaking with industry outlet The Block last week, Bob Greifeld said that for cryptocurrencies to succeed and reach their maximum potential, the speculation side of the industry will have to go.
This is likely in reference to the oft-cited idea that volatility drives away consumers from adopting this technology. Case in point, Facebook’s blockchain head David Marcus just last week said that the volatility in the markets will stop Bitcoin from becoming a proper digital currency.
A Tall Ask
These pundits of the world of traditional finance are urging for the speculative nature of the cryptocurrency market to end, but this may be a tall ask.
Simply put, Bitcoin price speculation, which is encapsulated by the volatility this market sees on a day-to-day basis, is a byproduct of the size of this asset class compared to its potential impact.
Like the DotCom stocks in the late-1990s and the early-2000s, Bitcoin and other cryptocurrencies are hyper-volatile, being susceptible to parabolic rises and brutal -80% crashes. And until Bitcoin and other cryptocurrencies reach full market saturation, meaning their full potential, this volatility is likely to persist, especially as the world wakes up to the potential that digital assets have to usurp everything.
