The Illusion of Legitimacy in Bitcoin

In a recent interview, Eugene Fama, a notable economist, made a bold prediction: he believes that the price of Bitcoin could potentially fall to zero. Fama argues that despite its newfound mainstream adoption, Bitcoin lacks intrinsic value. He stated, “If demand for Bitcoin disappears, so does its pricing.”

The Chilling Reality of Bitcoin's Future

When asked by podcast hosts if Bitcoin's price could eventually crash to zero, Fama's response was unsettling: “I would say it’s close to one.” He even expressed a hope for Bitcoin's collapse, suggesting that its survival would necessitate a complete re-evaluation of monetary theory.

Bitcoin: Not Money

In response to Fama’s claims about Bitcoin challenging monetary theory, it’s crucial to clarify that Bitcoin is not money. For an asset to qualify as money, it must serve as a medium of account. Currently, prices for goods, services, and other financial assets are rarely expressed in Bitcoin. Therefore, the success of Bitcoin does not present challenges for monetary theory.

Comparing Bitcoin to Gold

Many people view Bitcoin similarly to electronic gold. Just as gold serves as a store of value for older generations, Bitcoin represents a store of value for the younger generation, particularly those raised in the digital age.

Although gold has some industrial applications, its primary value derives from the belief that it will retain worth over time. Similarly, Bitcoin is occasionally used in transactions, but its value largely stems from the expectation that future generations will continue to value it.