Nobel Prize-winning economist Eugene Fama has expressed skepticism about the long-term viability of Bitcoin, predicting that the cryptocurrency could be worthless in a decade. Fama, known as the “Father of modern finance,” made these comments during a recent podcast appearance.

Fama’s Concerns About Cryptocurrencies

Fama stated that cryptocurrencies “violate all the rules of a medium of exchange” due to their highly variable real value. According to Fama, this instability makes them unsuitable as a reliable means of exchange. He also emphasized that the value of Bitcoin is not stable, which is a crucial characteristic of a successful medium of exchange.

The Probability of Bitcoin Becoming Worthless

When asked about the probability of Bitcoin’s value going to zero within the next decade, Fama replied that he would put the likelihood at “close to one.” However, it’s essential to note that Fama did not guarantee this outcome, and his statement was more of a probabilistic assessment.

Is Bitcoin a Bubble?

Fama expressed his disapproval of the term “economic bubble,” arguing that bubbles need to have a predictable ending. He also hopes that the Bitcoin bubble will burst, as he believes it challenges traditional monetary theory. Fama added that if Bitcoin survives, it would require a significant overhaul of monetary theory.

Criticisms of the Crypto Community

Fama’s comments have sparked criticism from some members of the crypto community. However, it’s worth noting that Fama’s predictions were not made with utmost confidence, and he acknowledged the possibility of being wrong.

Stablecoins and the Threat of 51% Attacks

Fama suggested that stablecoins, which are pegged to a stable asset like the US dollar, could work as a medium of exchange. However, he also highlighted the risk of 51% attacks, which could compromise the security of Bitcoin and other cryptocurrencies.

The Role of Government in the Crypto Market

Fama also emphasized the potential impact of government intervention on the crypto market. He believes that government involvement could accelerate the decline of Bitcoin’s value.

A Comparison with Gold

Fama prefers gold over Bitcoin due to its multiple use cases and stable value. This preference is based on his belief that a successful medium of exchange should have a stable real value.

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