In a recent interview, Eugene Fama predicted that the price of Bitcoin will fall to zero:
 

This newfound mainstream adoption has given Bitcoin an illusion of legitimacy, but Fama argues that it doesn’t change the fundamental issue: Bitcoin still has no intrinsic value. “If demand for Bitcoin disappears, so does its pricing,” Fama emphasized.

When pressed by podcast hosts about whether Bitcoin’s price could eventually crash to zero, Fama delivered a chilling response: “I would say it’s close to one.”

He went even further, stating that he hopes Bitcoin collapses because if it doesn’t, you have to start all over with monetary theory.”

“I’m hoping it will bust, because if it doesn’t, you have to start all over with monetary theory.”

Before responding to this, I should mention that I am not a Bitcoin investor and have no opinion on where the price is headed.  Instead, I’d like to respond to Fama’s claim that Bitcoin presents challenges for monetary theory.  This is false, because Bitcoin is not money.  For an asset to be money, it must be a medium of account.  Bitcoin is not a medium of account, as the prices of goods, services, labor and financial assets are rarely denominated in Bitcoin.  The success of Bitcoin presents no challenges at all for monetary theory.

I think of Bitcoin as sort of like electronic gold.  Gold is a store of value for the boomer generation, and Bitcoin is store of value for the zoomer generation—for people brought up in the era of iPhones and computers.

Gold has a few industrial uses, but most of its value comes from its use as a store of value.  People value gold primarily because they believe that in the future other people will value gold.

Bitcoin is occasionally used in transactions, but most of its value comes from its use as a store of value.  People value Bitcoin primarily because they believe that in the future other people will value Bitcoin.

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