In a recent interview, Eugene Fama suggested that Bitcoin’s price might ultimately plummet to zero:
According to Fama, the recent surge in mainstream acceptance has created a false sense of credibility for Bitcoin; however, he insists that the core issue remains unchanged: Bitcoin lacks intrinsic value. “If the demand for Bitcoin vanishes, so does its price,” Fama stressed.
When the podcast hosts probed him about the likelihood of Bitcoin’s price crashing to zero, Fama chillingly replied: “I would argue it’s close to one.”
He further expressed his hope for Bitcoin’s demise, noting that if it continues to exist, it would necessitate a complete reevaluation of monetary theory.”
“I’m wishing for it to fail, because if it doesn’t, we’d have to reassess monetary theory from scratch.”
Before addressing this, I want to clarify that I am not a Bitcoin investor, nor do I have any specific insight into its price trajectory. Instead, I wish to challenge Fama’s assertion that Bitcoin creates difficulties for monetary theory. This claim is inaccurate, as Bitcoin does not qualify as money. For an asset to function as money, it needs to act as a medium of account. Bitcoin does not serve as a medium of account since the prices of goods, services, labor, and financial assets are seldom expressed in Bitcoin. Thus, Bitcoin’s success poses no challenge to monetary theory.
I tend to view Bitcoin as analogous to digital gold. Gold serves as a store of value for the older generation, while Bitcoin fulfills that role for the younger generation—particularly those raised in the digital age of smartphones and computers.
Gold has some industrial applications, but its primary value stems from its function as a store of value. People cherish gold mainly because they believe that others will value it in the future.
Similarly, Bitcoin is sometimes used for transactions, but its predominant worth comes from its role as a store of value. People regard Bitcoin largely because they anticipate that others will place value on it in the future.
