Key Points
- Eugene Fama, a prominent figure in modern finance, predicts Bitcoin could become worthless within ten years.
- Fama believes cryptocurrencies violate the principles of a medium of exchange due to their unstable real value.
Eugene Fama, often referred to as the “Father of modern finance,” suggests that Bitcoin may hold no value in ten years’ time.
His reasoning is based on his belief that cryptocurrencies defy the fundamental principles of a medium of exchange. Fama voiced these views on a recent episode of the Capitalisn’t podcast.
Fama’s Views on Bitcoin
Fama, the author of the efficient markets hypothesis from the 1960s, didn’t guarantee Bitcoin’s worthlessness. Instead, when asked by podcast host and finance professor Luigi Zingales about the likelihood of Bitcoin’s value dropping to zero within a decade, Fama indicated it was highly probable.
During the interview, Fama expressed his disapproval of the term “economic bubble,” arguing that market outcomes are unpredictable. When asked by co-host Bethany McLean if Bitcoin was a bubble, Fama expressed his hope for its burst.
Fama’s reasoning is rooted in his belief that Bitcoin’s survival would necessitate a complete overhaul of monetary theory. He asserts that cryptocurrencies should not survive according to current understanding of monetary theory.
Stablecoins and Threats to Bitcoin
In response to McLean’s question about stablecoins, Fama suggested that using U.S. dollars on the blockchain could be viable due to their stable real value.
Fama also identified a 51% attack as a significant threat to Bitcoin, despite the high costs associated with such an attack. He argued that every transaction system faces issues with verification and rule enforcement.
The Nobel Prize-winning economist also expressed a preference for gold over Bitcoin due to its various use cases. He also suggested that government involvement in the crypto market may accelerate Bitcoin’s devaluation.
Despite his predictions, Fama did not express them with absolute certainty. His willingness to admit potential error and adapt his views, even at 86, was commended by Zingales.
