March of 2022
From the Bank of England :
Currently, the vast majority of cryptoasset activity is driven by the use of highly volatile unbacked cryptoassets as speculative investment assets.
Unbacked cryptoassets are non-replicable strings of computer code that can be owned and transferred without intermediaries, and have no underlying assets. Such cryptoassets (the most commonly known being Bitcoin and Ether) comprise around 90% of the total market capitalisation of cryptoassets.
Unbacked cryptoassets establish no claim on future income streams or collateral, meaning they have no intrinsic value. Although they tend to be based on technology which could bring benefits to the financial system, their value is not directly tied to the technology. These characteristics make them vulnerable to major price corrections that mean investors may lose the entire value of their investment. Bitcoin returns are three times as volatile as the S&P 500. Large daily swings in value are common – Bitcoin prices have fallen by 10% or more in a single day around 25 separate times over the past five years, on one occasion falling 27% in a single day. This price volatility makes unbacked cryptoassets unsuitable to be widely used as money, for example as a means of exchange or a store of value.
Points to ponder:
- unbacked cryptoasset
- no intrinsic value
- not suitable to be widely used as money/
not a store of value.