Eugene Fama, the renowned “Father of modern finance,” predicts that Bitcoin will have no value in ten years. According to Fama, cryptocurrencies “violate all the rules of a medium of exchange.” He explained that they lack stable real value and instead have highly variable real value. Fama believes that a medium of exchange with such characteristics is not expected to survive.
Fama, who is known for his work on the efficient markets hypothesis in the 1960s, did not make a definite statement that Bitcoin will be worthless. However, when asked by podcast host and finance professor Luigi Zingales about the probability of Bitcoin’s value going to zero within ten years, Fama responded by saying it was close to one.
During the interview, Fama expressed his disapproval of the term “economic bubble,” arguing that bubbles need to have a predictable ending, which is not the case in the market. When asked by journalist Bethany McLean if Bitcoin was a bubble, Fama expressed his hope that it would burst. He added that if it doesn’t, monetary theory would need to be completely reevaluated.
Fama stated that cryptocurrency violates all the rules of a medium of exchange, as it lacks stable value and people are unlikely to use it as a currency. This viewpoint drew anger from some members of the crypto community.
McLean then asked Fama about stablecoins, to which he responded that using U.S. dollars on the blockchain could be successful due to their stable real value.
Fama also highlighted the 51% attack as a significant threat to Bitcoin. While acknowledging that such an attack would be costly, he emphasized that every transaction system faces challenges in verification and rule enforcement.
Fama, who received a Nobel Prize in economics in 2013, also stated that gold is more favorable than Bitcoin due to its multiple use cases. He suggested that government involvement in the crypto market could accelerate the devaluation of Bitcoin.
It is worth noting that Fama acknowledged the main surface-level threats to decentralized digital money, but his predictions were not expressed with absolute certainty. Zingales commended Fama for his open-mindedness and willingness to adapt his beliefs at the age of 86, calling it remarkable.