Bitcoin has incurred a nasty fall in recent days, dropping from $40,000+ earlier in the month to about $30,000 at press time. Thus, the currency has lost more than $10,000 since reaching its new all-time high, and many analysts – including Agustin Carstens of the Bank for International Settlements – believe that the world’s number one digital asset by market cap may be in a heap of trouble.
Agustin Carstens: Bitcoin May Not Last Beyond a Certain Point
In a recent interview, Carstens went so far as to claim that the entire bitcoin system may come crashing down in the coming future. He states:
Investors must be cognizant that bitcoin may well break down altogether.
One of the big problems he has with bitcoin is that it is a finite currency. He says that just over 18 million of BTC units have been mined at press time, which leaves about 2.5 million to go until we reach bitcoin’s full 21 million units. Once they’re all fully in circulation by the year 2140, the currency may not last much longer. There appears to be no set plan for when this happens, and everyone working in bitcoin is likely to experience a huge blow.
Furthermore, there appears to be an incorrect idea in his mind that bitcoin and crypto should – or even could – potentially replace fiat currency somewhere down the line, but Carstens claims this would heavily damage the world’s financial markets. He says that without fiat currencies, not just banks but businesses and the entire global economy would fail to function. He says:
Sound money is central to our market economy, and it is central banks that are uniquely placed to provide this. If digital currencies are needed, central banks should be the ones to issue them.
A potential fix for many analysts and industry experts exists in stable coins, which over the years, have become much more prominent. Designed to limit volatility and protect crypto investors from risk, stable currencies are backed by fiat and are designed to be less prone to price swings than more mainstream digital currencies such as Ethereum and bitcoin.
Stable Coins Don’t Solve Much
In addition, they are also designed to serve as payment methods given that they are tied to standard currencies such as the U.S. dollar, but according to Carstens, stable assets do not solve anything in that they are often issued through private companies, such as Facebook’s Libra. It’s not a bank, but rather a social media company that will be responsible for maintaining and backing the asset.
He says unless these assets are delivered by central banks, they hold no value and cannot be trusted to take part in financial markets. Right now, he feels that stable currencies have not surpassed their testing phases, and that more research needs to be done before any proper integration can take place.