Vanguard Economist: ‘Decent Probability’ Bitcoin Price Goes to Zero
An economist at Vanguard, one of the world’s largest asset managers, says that there is a “decent probability” that the bitcoin price will eventually drop to zero.
The chief economist for $5.1 trillion asset manager Vanguard, Joe Davis, wrote in a blog post for etf.com that despite the fact that the firm is enthusiastic about blockchain technology in general, it does not believe cryptocurrencies have a viable use case. Davis said:
- “I’m enthusiastic about the blockchain technology that makes bitcoin possible. In fact, Vanguard is using such technology. As for bitcoin the currency? I see a decent probability that its price goes to zero.”
Davis says that bitcoin should not be considered as a viable currency because, despite the fact that it could qualify as a unit of account and a medium of exchange, it is not as useful when it comes to a store of value. Also, he mentioned that its current value is purely based on speculation instead of economic fundamentals. Davis wrote:
- “The investment case for cryptocurrencies is weak. Unlike stocks and bonds, currencies generate no cash flows such as interest payments or dividends that can explain their prices. National currencies derive their prices from the underlying economic activity of the countries that issue them. Cryptocurrency prices, on the other hand, are generally not based on economic fundamentals. To date, their prices have depended more on speculation about their eventual adoption and use.”
He went on to alert investors against allocating capital to bitcoin and cryptocurrencies in general, since this will limit the amount of funds they will have available to invest in “tried and true assets”.