Bitcoin is by far the most popular and well-known cryptocurrency, but BTC still has its detractors. Within that category is the Bank of England, which warns that those investing in the crypto should be ready to lose everything as it could at some point become “worthless.”
Bitcoin, like most crypto, often experiences wild price fluctuations: it has dropped by $20,000 in the last month. However, it’s worth remembering that one Bitcoin at its current price of $48,500 is worth almost five times the $10,000 price it sat at just 14 months ago.
But the Bank of England’s deputy governor, Sir Jon Cunliffe, has warned of the risks associated with crypto investment. “Their price can vary quite considerably and [bitcoins] could theoretically or practically drop to zero,” he told the BBC.
The Bank said that major institutions should take a cautious approach to adopting crypto assets and that it would pay close attention to developments in the market, writes The Guardian.
“The problem is that, unlike traditional forms of money, Bitcoin isn’t used to price things other than itself. As Bitcoiners themselves are fond of saying, ‘one Bitcoin = one Bitcoin’. But a tautology does not a currency make,” wrote Thomas Belsham, an employee in the Bank’s stakeholder and media engagement division.
Belsham added that the scarcity and limited nature of Bitcoin—no more than 21 million Bitcoins can ever be mined—“may even, ultimately, render Bitcoin worthless.”
Around 18.9 million Bitcoins, or 90 percent of the total supply, have now been mined, but the network is designed in such a way that the final coin won’t be mined until 2140. Belsham still warns that sustaining this system could become more difficult over time.
“Simple game theory tells us that a process of backward induction should, really, at some point, induce the smart money to get out. And were that to happen, investors really should be prepared to lose everything. Eventually.”
Government agencies’ views on Bitcoin and cryptocurrency in general tend to vary from country to country. Sweden has called for the whole of Europe to ban crypto mining over environmental concerns, while China has declared all crypto transactions illegal. El Salvador, by contrast, was the first nation to accept Bitcoin as legal tender and plans to build an entire city based around BTC.