O Financial times published an article on the viability of cryptocurrencies, especially following the approval of bitcoin ETFs by the US Securities and Exchange Commission.
ETFs are seen by many cryptocurrency enthusiasts as an important proof of concept, suggesting an important step in Bitcoin’s integration into the mainstream financial system.
However, the FT questions the practical functionality of bitcoin as a currency and calls ETFs just an ‘a “siren song for the Bitcoin bubble.”
The article emphasizes that the true proof-of-concept for a coin is its economic utility. In comparison, some emerging market currencies have failed in this regard due to high inflation, leading residents to prefer more stable currencies.
“Bitcoin has no value”
Analysis by the Financial Times shows that, apart from some applications in emerging economies, cryptocurrencies have little value for ordinary everyday transactions. They are seen more as speculative collectibles, similar to baseball cards, than as functional currency.
Furthermore, the FT argues that recent bitcoin ETFs, while generating excitement, do not necessarily promote the broader use of bitcoin in everyday transactions in the US or global economy. The difficulty in making simple purchases, such as a cup of coffee with bitcoin, remains a challenge, the paper said.
However, if Bitcoin is primarily for trading and speculation, these ETFs can be seen as a proof of concept in that regard.
They are likely to encourage individual investors who find trading on traditional exchanges safer than previously existing cryptocurrency trading platforms.
However, the FT warns that established financial institutions should be cautious. History has shown that the deflation of bubbles, such as the technology and real estate sectors, has revealed unexpected legal and financial liabilities. A possible deflation of Bitcoin speculation could expose similar risks.
The article also discusses “market democratization” as a common feature of financial bubbles, suggesting that Bitcoin ETFs could be a bait for another bubble.
“The idea that the playing field has been leveled and that everyone now has access to assets has traditionally been a siren call that entices investors to participate in financial bubbles. Bitcoin ETFs appear to be the bait for this bubble.” — says the FT.
“Bitcoin is not digital gold”
The comparison of bitcoin to gold is refuted by the FT, which notes that precious metals have economic applications beyond speculation or store of value: “The fillings in my mouth or my wedding ring will never be bitcoin.” — says the author of the text.
The article concludes by comparing the bitcoin phenomenon to the historic Dutch tulip bubble of the 17th century, suggesting a possible increase in public interest, but for the wrong reasons.
The Financial Times also points out that while bitcoin and other cryptocurrencies remain primarily instruments of speculation, they have not yet demonstrated sufficient economic value to be considered currencies in the traditional sense.
Source: Live Coins
Barry Siefert is an accomplished journalist and author at The Nation View. He is known for his expertise in the field of cryptocurrency, and has written extensively on the topic. With a background in finance and economics, Barry has a deep understanding of the underlying technology and market forces that drive the crypto industry.
