The head of the UK’s central bank, Andrew Bailey, said on Thursday (06) that cryptocurrencies “have no intrinsic value” and that investors need to be willing to “lose all their money” to enter this market. The comments were made during a press conference, when a journalist questioned whether the Bank of England (BoE) was concerned about the huge fluctuations observed in the prices of major digital currencies in recent months.
“I’m afraid that they (cryptocurrencies) have no intrinsic value,” Bailey replied to the journalist. “However, this does not mean that people do not attach value to them, because they can have extrinsic value.” He refers to the speculative nature of crypto such as bitcoin (BTC) and dogecoin (DOGE), which undergo wide variations on a daily basis.
“So I will say this very directly again: buy them only if you are prepared to lose all your money,” concluded Bailey. The Bank of England and authorities around the world have been showing great concern about the cryptocurrency market that could possibly threaten financial stability.
Governments fear speculative bubble as in 2017
The fear is that something similar will happen to 2017, the year in which bitcoin (BTC) left less than US $ 1,000 and reached a record high of US $ 20,000 for the first time, but it plummeted about 75% shortly afterwards. The cryptocurrency was only able to overcome this maximum again at the end of 2020. Now, the asset operates with more than 100% of accumulated appreciation this year, making governments believe that there is a potential speculative bubble.
However, there are big differences between 2017 and 2021. This year, many companies made millionaire contributions in bitcoin and ether, the two main cryptocurrencies that are increasingly popular with institutional investors. Tesla’s $ 1.5 billion purchase in January by Tesla in January and Microstrategy’s $ 1 billion purchase in February are great examples of the legitimacy of investments in digital assets.
The traditional financial system is also increasingly integrating cryptocurrencies. Visa and Mastercard have already started to process payments and allow digital currency trading on their services, while PayPal continues to announce crypto news.
In April, Coinbase, the largest cryptocurrency exchange in the United States, went public and became the first company in the sector to be traded on the Nasdaq stock exchange. That said, the market is much more consolidated and mature, but inevitably remains subject to price fluctuations.
BoE has been watching cryptocurrencies “carefully”
When this whole wave of appreciation started at the end of last year, cryptocurrencies started to gain space in the news around the world. In February, just after the mass purchases organized on Reddit and the WallStreetBets group caused a drastic rise in dogecoin (DOGE) and GameStop shares, Bailey said he was watching this boom “carefully”.
He repeated the same phrase this past Thursday: “The markets are something we watch very carefully”. Bailey said that cryptocurrency trading and retail investments are the responsibility of the Bank of England’s Financial Policy Committee (FPC), which will present its next report in June.
“There have been a number of developments in the past few months,” said Bailey. “I would not say that any of them (crypto) alone should be considered a risk to financial stability, but the FPC will be looking very carefully at the body of evidence.”
With information: CNBC