The comments came after the governor was asked if the Bank of England was concerned about wild price swings seen in crypto over the past six months. Photo: Kirsty O’Connor / Pool via REUTERS
Bank of England Governor Andrew Bailey has a clear message for cryptocurrency investors: be ready to lose all of your money.
“I’m afraid they have no intrinsic value,” Bailey told journalists on Thursday. “Well, that doesn’t mean people don’t value them because they can have external value. But they have no internal value.”
“So I’m going to say this again quite frankly: only buy them when you’re willing to lose all your money.”
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The comments came after the governor was asked if the Bank of England was concerned about wild price swings seen in crypto over the past six months.
Bitcoin (BTC-USD) and Ethereum (ETH-USD) – the two largest cryptocurrencies in the world – have hit new record highs this year thanks to increasing institutional acceptance and a resurgence in retail interest.
However, the staggering price hikes have sparked frenzied activity elsewhere in the market. The best-known example is Dogecoin (DOGE-USD), the joke cryptocurrency that has risen from the relatively dark world to the fourth largest crypto token in the world with a market value of over USD 70 billion.
Analysts are unable to understand the daily price movement of Dogecoin, which appears to be largely motivated by memes and Elon Musk tweets. The meme token is subject to tremendous volatility – it rose 55% this week alone before falling 10% the next day.
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The current crypto craze appears to be an extension of the retail boom seen earlier this year. An army of amateur investors coordinated Reddit to wage a war on short sellers in stocks like GameStop (GME) and AMC Theaters (AMC). Stock prices fluctuated wildly and some analysts warned that the corners of the market would break away from reality. Federal Reserve President Jerome Powell recently said the ratings were “frothy”.
The story goes on
In February, Bailey said he was “watching” the retail boom “closely,” and the governor repeated the phrase Thursday.
“Markets are something that we are watching very closely,” he said.
Bailey said crypto trading and retail investing are the responsibility of the Bank of England’s Financial Policy Committee (FPC), which will present its next report in June.
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“There have been a number of developments over the past few months,” he said. “I wouldn’t say any of them should, on their own, pose a risk to financial stability, but the FPC will be very careful about the sum total of the evidence.”
The comments came as the Bank of England presented its latest monetary policy decisions and released updated forecasts for the UK economy.
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