Cryptocurrencies have taken a back seat to economists at the University of Chicago, known for its liberal economic thinking in the 1950s. But in the age of blockchain, how much of traditional monetary theory can still be applied to markets?
For Eugene Fama, winner of the Nobel Prize in Economics in 2013 and considered the “father of modern finance”, cryptocurrencies have no real value and, in ten years, Bitcoin will have its value reduced to zero.#MicroStrategyAcquiresBTC
In conversation with economist Luigi Zingales and journalist Bethany McLean on the Capitalisn’t podcast (did you like the pun?), Gene Fama acknowledges the difficulty of making predictions and says that economic models are not an absolute truth.#
Bitcoin has seen a nearly 50% appreciation since President Donald Trump was elected in the United States with a pro-crypto policy. The digital currency is now worth more than US$100,000 and some say it could reach US$150,000 during the Republican's administration.
With more than $2 trillion in market value, Bitcoin has already reached the same level as the Magnificent Seven, the tech giants traded on Wall Street exchanges. Asked if this could signal the beginning of a bubble, Gene says he “hopes so.”
“I can’t predict when it’s going to blow up, so I hope it will blow up, but I can’t predict it. I hope it does because otherwise we’ll have to start all over again with monetary theory,” he says.
The economist also explains that care must be taken when characterizing financial bubbles, which according to him has been done frivolously. “My definition of a financial bubble is very simple: it is something that has a foreseeable end. If you can't predict when it will end, you are just using that expression loosely. I cancelled my subscription to The Economist because they were using that word all the time without saying what they mean by it. If it is as simple as a foreseeable end, then I want to see you make the prediction.”#BTC走势分析
Luigi then asks what the probability is that, in ten years, the value of Bitcoin will reach zero. Gene responds that the chances are close to 1, that is, it is very likely to happen. “But I still believe in monetary theory. I could be wrong,” he emphasizes.
