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Will Bitcoin Go to Zero? A Nobel Economist Weighs In

Will Bitcoin go to zero? Nobel laureate Eugene F. Fama believes it will, citing its lack of intrinsic value and reliance on speculation. But with institutional adoption and growing mainstream acceptance, does Bitcoin have a future?

Bitcoin, the world’s first and most famous cryptocurrency, has sparked debates since its inception in 2009. While some see it as a revolutionary financial instrument, others argue that it is a speculative bubble bound to collapse. One of the latest voices to predict Bitcoin’s downfall is Nobel laureate Eugene F. Fama, often called the “Father of Modern Finance.” In a recent discussion on the Capitalisn’t podcast, Fama argued that Bitcoin would eventually go to zero.

With Bitcoin’s market capitalization reaching $2 trillion as of December 2024—surpassing major companies like Tesla and Meta—why does Fama remain skeptical? This article explores his reasoning, Bitcoin’s current standing, and the broader implications for the financial world.

Table of Contents

The Nobel Economist’s Case Against Bitcoin

Eugene F. Fama, a professor at the University of Chicago and a pioneer of the Efficient Market Hypothesis (EMH), believes that Bitcoin lacks intrinsic value and will eventually become worthless. His argument rests on three key points:

1. Bitcoin’s Lack of Intrinsic Value

Unlike stocks, bonds, or commodities, Bitcoin does not generate cash flow, dividends, or tangible assets. Fama argues that assets with no intrinsic value cannot sustain long-term market demand. If investors stop believing in Bitcoin’s worth, it could quickly collapse.

2. Volatility and Unstable Demand

Bitcoin’s price is notorious for its wild fluctuations. While some claim this volatility reflects growing adoption, Fama sees it as a sign of an unstable asset. Unlike traditional currencies backed by governments and central banks, Bitcoin’s value depends entirely on investor sentiment, making it vulnerable to dramatic price crashes.

3. Dependence on Speculation, Not Utility

Supporters claim that Bitcoin serves as “digital gold” or a hedge against inflation. However, Fama argues that it is mostly used as a speculative asset rather than a reliable store of value or medium of exchange. If people stop treating Bitcoin as an investment, demand could plummet, leading to a sharp decline in price.

Bitcoin’s Counterarguments: Why It May Survive

While Fama’s prediction is bold, not everyone agrees. Several influential figures and institutions have reversed their stance on Bitcoin, highlighting factors that could prevent it from going to zero.

1. Institutional Adoption and Changing Views

Prominent investors like Ray Dalio, who once called crypto a bubble, now praise Bitcoin as “one hell of an invention.” Larry Fink, CEO of BlackRock, has shifted from calling Bitcoin a tool for money laundering to recognizing it as a legitimate financial asset. Even former President Donald Trump, who dismissed Bitcoin as “thin air” in his first term, has profited billions from his own cryptocurrency ventures.

2. Bitcoin as a Store of Value

Some argue that Bitcoin’s scarcity—it is limited to 21 million coins—gives it a long-term value similar to gold. Unlike fiat currencies, which can be printed indefinitely by central banks, Bitcoin’s fixed supply may drive demand, especially in times of inflation or economic instability.

3. Decentralization and Financial Freedom

Bitcoin’s appeal lies in its decentralized nature, allowing individuals to transact without reliance on banks or governments. For people in countries with economic instability or authoritarian regimes, Bitcoin provides a way to store wealth outside traditional financial systems.

The Energy Debate: A Sustainability Concern

One of the most contentious aspects of Bitcoin is its environmental impact. The Bitcoin network consumes around 91 terawatt-hours of electricity annually—more than some countries. Critics argue that this level of energy use is unsustainable, while supporters claim that Bitcoin mining is increasingly shifting toward renewable energy sources.

The Political Paradox: Lobbying for a Decentralized Asset?

A major contradiction in Bitcoin’s story is its growing involvement in politics. Despite being designed as a decentralized alternative to government-controlled currencies, Bitcoin advocates have spent billions lobbying for regulatory approval. If Bitcoin truly functions outside the traditional financial system, why does it need political backing?

Conclusion

Eugene F. Fama’s prediction that Bitcoin will eventually go to zero raises important questions about its long-term sustainability. While Bitcoin lacks intrinsic value and remains highly volatile, it has also gained mainstream acceptance, institutional backing, and a dedicated user base.

Will Bitcoin truly collapse, or will it continue to evolve as a key financial asset? The answer may depend on regulatory decisions, technological advancements, and whether investors continue to believe in its value. For now, Bitcoin remains a highly debated and unpredictable force in the financial world.

FAQs

Why does Nobel laureate Eugene F. Fama believe Bitcoin will go to zero?

Fama argues that Bitcoin lacks intrinsic value, relies on speculation rather than utility, and remains highly volatile. He believes that once investor sentiment fades, Bitcoin’s value could collapse.

Has Bitcoin ever been declared “dead” before?

Yes, Bitcoin has been declared “dead” hundreds of times by skeptics. However, it has repeatedly recovered from price crashes and reached new highs.

What are the counterarguments to Bitcoin going to zero?

Supporters argue that Bitcoin’s scarcity (21 million supply), growing institutional adoption, and decentralization make it valuable as a store of value and hedge against inflation.

Does Bitcoin have any real-world utility?

Bitcoin is used for transactions, particularly in countries with unstable financial systems. However, its primary use today remains speculative investment rather than everyday payments.

What role does regulation play in Bitcoin’s future?

Regulation can either legitimize Bitcoin as an asset class or hinder its adoption. Increased government oversight could impact its price and usage.

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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.

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