"If the Bitcoin Bubble Doesn't Burst, Monetary Theory Must Start Over"
Nobel Laureate Eugene Fama Predicts Bitcoin Value Will Likely Drop to Zero Within 10 Years
Criticizes Cryptocurrency as Violating All Rules of a Medium of Exchange
Raises Concerns Over Blockchain Security and the 51% Attack
Suggests Stablecoins Backed by the Dollar May Be More Effective
Eugene Fama, a Nobel laureate in economics and known as the 'Father of Modern Finance,' professor at the University of Chicago, predicted that the value of Bitcoin is highly likely to drop to zero within 10 years.
According to cryptocurrency media CryptoNews on the 2nd (local time), Professor Fama stated on the podcast 'Capitalisn't' on the 30th of last month, "Cryptocurrencies violate all the rules of a medium of exchange," adding, "Their intrinsic value is unstable and highly volatile. Such a type of medium of exchange cannot survive."
When asked by Professor Luigi Zingales, the podcast host, "What is the probability that Bitcoin's value will be zero within the next 10 years?" Fama emphasized that nothing is predictable in the market but answered, "It is close to 1." In other words, he viewed the probability of Bitcoin becoming worthless as virtually 100%.
Professor Fama said that cryptocurrencies cannot be explained by traditional monetary theory. He explained, "I hope the Bitcoin bubble bursts. Otherwise, we will have to restart monetary theory from scratch. The monetary theories we know indicate that cryptocurrencies will not survive."
Fama also raised doubts about blockchain technology. He pointed out the possibility of a '51% attack,' stating, "Of course, it would be costly to carry out such an attack, but there is an issue regarding verification and who enforces the rules."
A 51% attack refers to a hacking attack in a blockchain network where an attacker gains control of more than 51% of the network's mining power, allowing them to manipulate the network. Hackers can use a 51% attack to prevent transactions from being processed or alter existing transactions to gain unfair profits.
Regarding stablecoins, Professor Fama evaluated, "Since the dollar is stable and has real value, using the dollar on the blockchain could be effective."
Fama, who developed the Efficient Market Hypothesis, is recognized as a scholar who provided a rational argument for investing in index funds by asserting that "all market information is immediately reflected in asset prices." In 2013, he was jointly awarded the Nobel Prize in Economics along with Robert Shiller of Yale University and Lars Peter Hansen of the University of Chicago for this achievement. Currently, he ranks 10th among the 'World's Most Influential Economists' selected by RePEc, a professional economics research website.
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