Expert comment: Bitcoin is "10-years-old and still immature"
Today marks the 10th anniversary of the paper which led to the creation of the cryptocurrency Bitcoin. Professor Alistair Milne, Professor of Financial Economics, discusses the history of this form of electronic cash and shares his thoughts on its future.
Professor Milne said: “10-years-old and still immature. Bitcoin, hardly known to anyone for the first five years of its existence, has had two great price explosions. The first and biggest was in 2013 when the price rose more than fifty-fold from $14 to $800. Then for three years, the price was pretty much flat, before a further growth spurt in 2017, prices rising twenty-fold from $835 to $17000 (but this year has since fallen back by nearly a third to $6,286.)
“What lies behind these price rises? The answer is that nothing lies behind them. There is no explanation because almost all holdings of Bitcoin are for speculation, the hope of financial gain. The Bitcoin price is in what engineers call a “metastable equilibrium”. Think of a wine bottle on its side at a supermarket checkout. Roll it forward (slowly, not too fast) and it stays where it is left. Roll it slowly back and again stays where it is last touched. Bitcoin price is the same, the price today depends on opinion of what it might be worth in the future. But the views of market participants on what it might be worth in the future depends almost entirely on what it is worth today.
“Whatever disturbs the Bitcoin price, up or down, fear or greed, it moves but there is no underlying fundamental reason for change, just sentiment, and no reason for either past price rises or past price falls to continue. It is a purely speculative asset, it has not yet matured to find real-world uses (yes some application for illegal commerce and avoiding government controls, but little else).
“Will Bitcoin mature? There are different opinions. Some think it has value as an alternative to government-issued money with the advantage of being outside of government control. But you cannot borrow Bitcoin, have your salary paid in Bitcoin or get it accepted in most online or high street retailers. There are many reasons to be sceptical about whether Bitcoin will ever mature to become a genuine financial asset.
"The best that can be said, we need to be patient, wait until say the 20th anniversary to find out.”
Notes for editors
Press release reference number: 18/145
º¬Ðß²ÝÊÓƵ is equipped with a live in-house broadcast unit via the Globelynx network. To arrange an interview with one of our experts please contact the press office on 01509 223491. Bookings can be made online via www.globelynx.com
º¬Ðß²ÝÊÓƵ is one of the country’s leading universities, with an international reputation for research that matters, excellence in teaching, strong links with industry, and unrivalled achievement in sport and its underpinning academic disciplines.
It has been awarded five stars in the independent QS Stars university rating scheme, named the best university in the world for sports-related subjects in the 2018 QS World University Rankings, top in the country for its student experience in the 2018 THE Student Experience Survey and named University of the Year by The Times and Sunday Times University Guide 2019 and the Whatuni Student Choice Awards 2018.
º¬Ðß²ÝÊÓƵ is in the top 10 of every national league table, being ranked 4th in the Guardian University League Table 2019, 5th in the Times and Sunday Times Good University Guide 2019 and 7th in The UK Complete University Guide 2019. It was also named Sports University of the Year by The Times and Sunday Times Good University Guide 2017.
º¬Ðß²ÝÊÓƵ is consistently ranked in the top twenty of UK universities in the Times Higher Education’s ‘table of tables’ and is in the top 10 in England for research intensity. In recognition of its contribution to the sector, º¬Ðß²ÝÊÓƵ has been awarded seven Queen's Anniversary Prizes.
The º¬Ðß²ÝÊÓƵ London campus is based on the Queen Elizabeth Olympic Park and offers postgraduate and executive-level education, as well as research and enterprise opportunities.
It is home to influential thought leaders, pioneering researchers and creative innovators who provide students with the highest quality of teaching and the very latest in modern thinking.
Today marks the 10th anniversary of the paper which led to the creation of the cryptocurrency Bitcoin. Professor Alistair Milne, Professor of Financial Economics, discusses the history of this form of electronic cash and shares his thoughts on its future.
Professor Milne said: “10-years-old and still immature. Bitcoin, hardly known to anyone for the first five years of its existence, has had two great price explosions. The first and biggest was in 2013 when the price rose more than fifty-fold from $14 to $800. Then for three years, the price was pretty much flat, before a further growth spurt in 2017, prices rising twenty-fold from $835 to $17000 (but this year has since fallen back by nearly a third to $6,286.)
“What lies behind these price rises? The answer is that nothing lies behind them. There is no explanation because almost all holdings of Bitcoin are for speculation, the hope of financial gain. The Bitcoin price is in what engineers call a “metastable equilibrium”. Think of a wine bottle on its side at a supermarket checkout. Roll it forward (slowly, not too fast) and it stays where it is left. Roll it slowly back and again stays where it is last touched. Bitcoin price is the same, the price today depends on opinion of what it might be worth in the future. But the views of market participants on what it might be worth in the future depends almost entirely on what it is worth today.
“Whatever disturbs the Bitcoin price, up or down, fear or greed, it moves but there is no underlying fundamental reason for change, just sentiment, and no reason for either past price rises or past price falls to continue. It is a purely speculative asset, it has not yet matured to find real-world uses (yes some application for illegal commerce and avoiding government controls, but little else).
“Will Bitcoin mature? There are different opinions. Some think it has value as an alternative to government-issued money with the advantage of being outside of government control. But you cannot borrow Bitcoin, have your salary paid in Bitcoin or get it accepted in most online or high street retailers. There are many reasons to be sceptical about whether Bitcoin will ever mature to become a genuine financial asset.
"The best that can be said, we need to be patient, wait until say the 20th anniversary to find out.”
Notes for editors
Press release reference number: 18/145
º¬Ðß²ÝÊÓƵ is equipped with a live in-house broadcast unit via the Globelynx network. To arrange an interview with one of our experts please contact the press office on 01509 223491. Bookings can be made online via www.globelynx.com
º¬Ðß²ÝÊÓƵ is one of the country’s leading universities, with an international reputation for research that matters, excellence in teaching, strong links with industry, and unrivalled achievement in sport and its underpinning academic disciplines.
It has been awarded five stars in the independent QS Stars university rating scheme, named the best university in the world for sports-related subjects in the 2018 QS World University Rankings, top in the country for its student experience in the 2018 THE Student Experience Survey and named University of the Year by The Times and Sunday Times University Guide 2019 and the Whatuni Student Choice Awards 2018.
º¬Ðß²ÝÊÓƵ is in the top 10 of every national league table, being ranked 4th in the Guardian University League Table 2019, 5th in the Times and Sunday Times Good University Guide 2019 and 7th in The UK Complete University Guide 2019. It was also named Sports University of the Year by The Times and Sunday Times Good University Guide 2017.
º¬Ðß²ÝÊÓƵ is consistently ranked in the top twenty of UK universities in the Times Higher Education’s ‘table of tables’ and is in the top 10 in England for research intensity. In recognition of its contribution to the sector, º¬Ðß²ÝÊÓƵ has been awarded seven Queen's Anniversary Prizes.
The º¬Ðß²ÝÊÓƵ London campus is based on the Queen Elizabeth Olympic Park and offers postgraduate and executive-level education, as well as research and enterprise opportunities.
It is home to influential thought leaders, pioneering researchers and creative innovators who provide students with the highest quality of teaching and the very latest in modern thinking.
