Eugene Fama Predicts Bitcoin Will Be Worthless in a Decade

Eugene Fama, the renowned “Father of modern finance,” predicts Bitcoin will be worthless in a decade. Why? Cryptocurrencies “violate all the rules of a medium of exchange,” Fama said on the Jan. 30 episode of Capitalisn’t.

Eugene Fama, widely regarded as the “Father of modern finance,” has cast doubt on the enduring value of Bitcoin, predicting that the cryptocurrency will be worthless in a decade.

In an appearance on the Jan. 30 episode of the Capitalisn’t podcast, Fama asserted that cryptocurrencies “violate all the rules of a medium of exchange.”

“They don’t have a stable real value. You know, they have highly variable real value. That kind of medium of exchange is not supposed to survive.”

Fama, who is best known for authoring the efficient markets hypothesis in the 1960s, didn’t definitively guarantee that Bitcoin will be worthless. However, he agreed when podcast host and finance professor Luigi Zingales asked him to estimate the probability that, “within 10 years, the value of Bitcoin would go to zero?”

“I would say it’s close to one,” Fama replied.

The interview began with Fama expressing his disapproval of the term “economic bubble,” arguing that bubbles need to have a predictable ending, but nothing in the market is predictable.

Journalist Bethany McLean, who cohosts the show with Zingales, then asked Fama whether Bitcoin was a bubble, to which he replied that he hopes it bursts.

“I’m hoping it would bust because, if it doesn’t, we have to start all over with monetary theory — it’s gone,” Fama said. “It might be gone already.”

“All we thought we know about monetary theory says [cryptocurrency] shouldn’t survive,” Fama adds.

Crypto violates all the rules of a medium of exchange as they don’t have stable value and people won’t use it as a currency, he explained. This sentiment, predictably so, angered some in the crypto community.

“What about stablecoins?”

McLean posed that question to Fama, who said using U.S. dollars on the blockchain “could work,” because dollars have “stable, real value.”

Another big threat to Bitcoin voiced by Fama is 51% attack. Although such an attack would have been costly, Fama says that every transaction system faces “a problem of verification and a problem of who is enforcing the rules.”

Fama, who was awarded with a Nobel Prize in economics in 2013, also insists that — unlike Bitcoin — gold is more favorable because it has many use cases. And the government’s role in the crypto market may speed up the loss of value of Bitcoin.

It’s worth noting that Fama essentially checked the boxes of the main surface-level threats to decentralized digital money, but that none of his predictions were expressed with utmost confidence. 

“His open-mindedness for admitting that he might be wrong… he’s willing to adapt his universe at age 86,” Zingales said. “I think that’s really remarkable.”