The leader of the Bank of England has a warning for investors in cryptocurrencies like Bitcoin: “They have no intrinsic value.”
When asked at a press conference on May 6 about rising prices of the digital currencies Bank of England Governor Andrew Bailey criticized them as purely speculative vehicles. “That doesn’t mean to say people don’t put a value on them, because they have extrinsic value. But they have no intrinsic value,” Governor Bailey said.
Then he issued a stark warning. “I’m going to say this very bluntly again,” stated Bailey. “Buy them only if you’re prepared to lose all your money.”
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The central banker’s warning mirrors an alert from the United Kingdom’s Financial Conduct Authority, which in January warned, “Investing in cryptoassets, or investments and lending linked to them, generally involves taking very high risks with investors’ money,” the FCA said. “If consumers invest in these types of product, they should be prepared to lose all their money.”
Buyers have flocked to cryptocurrencies, bidding prices ever higher. But the speculative nature of cryptocurrencies has sent holders on a wild rollercoaster ride. Bitcoin, for example, lost nearly one-quarter of its value during the third week of February. Then, in mid-April the digital currency collapsed again, losing more than one-fifth of its value. Advocates of digital currencies like Bitcoin claim they are a good store of value, even a potential replacement for gold. But the cryptocurrencies’ extreme volatility is clear evidence that they are no replacement for gold, as the Bank of England and the Financial Conduct Authority warn.