Crypto assets are ‘worth nothing,’ says ECB’s Christine Lagarde | Hacker News Reader

Crypto assets are ‘worth nothing,’ says ECB’s Christine Lagarde

politico.eu

32 pointsbelter81 comments

I'm not a fan of Bitcoin but this statement is nonsense. A Bitcoin is worth something because some people are willing to pay for it, just like a car is worth something for that same reason.

You might say that a car has 'real value' because it can help you to travel from place A to B. But similarly a Bitcoin has real value, at least for some people, because it can help you transfer or store money. One might say that there are better alternatives for Bitcoin, which might make Bitcoin eventually obsolete and worthless. But again similarly, for every car on the market right now, there will be probably a better alternative in the future.

It's amazing to hear the chief of ECB make a statement so obviously and fundamentally wrong.

> But similarly a Bitcoin has real value, at least for some people, because it can help you transfer or store money.

It does that function just as well (not that well, really) at 30’000 dollars per bitcoin as it does at 30’000 bitcoins per dollar.

With a market cap of $700, you would find that it is very poor at both transferring and storing any value. First of all, you're limited to $700, second, a single computer could attack the network.

Fair enough. But even a small amount could suffice if the turnover was fast enough. How many of the circulating bitcoins are used in transactions anyway?

>It's amazing to hear the chief of ECB make a statement so obviously and fundamentally wrong.

Oh you sweet summer child. Remember when Olaf Scholz said, while he was minister of finance, that the best way to invest is to keep your money in your checking account? Yeah, those are EU politicians and their financial wisdom for you.

I'm surprised the EU is still functioning and hasn't yet collapsed with such morons at the helm.

> I'm not a fan of Bitcoin but this statement is nonsense.

Only if you read it as a statement of fact instead of as a policymaker giving hints on their view of the market.

key word: policy maker.

As in, they could enact policies which push the value towards 0.

Yes, limited to EU countries, and even there limited, but it is possible that banking restrictions make it effectively impossible to hold crypto in anything which resembles a bank account (including i.e. Coinbase) which would certainly put a damper on EU demand and would set precedent for other countries.

However, European regulators also approved/allowed various investment products related to cryptocurrencies and law makers are creating a framework for markets/services around them (MiCA).

So while the ECB might express one view here, I am not sure it is a homogeneous view among policy makers in the EU.

As a simple police matter. we can track the flow of bitcoin very easily. Imagine we created a law, one is not allowed to interact with any "blacklisted/tainted" account/wallet and any account/wallet that interacts with a blacklisted/tainted account/walletn after its been marked as blacklisted/tainted is automatically blacklisted/tainted itself (easy to determine in bitcoin). I'd hazard to say, that such a policy would have a quick impact on bitcoin's valuation.

now, at first glance, this type of law might seem reasonable - if an account has been marked as doing illegal actions, any account that interacts with it is benefiting from said illegal actions.

However, this would setup a world of griefers. In bitcoin (I believe) you don't really have the ability to accept or reject transfers. if someone transfers coins to my wallet's address, it will be mine. Imagine someone who gains access to a blacklisted wallet and just transfers tiny amounts to all the addresses that contain massive sums of bitcoin, thereby tainting it all.

Eth and monero are way better at that than btc, actually. Cryptocurrency pricing is based on brand.

Agreed with the first sentence. Ethereum is not about the price of coin, just about its need to power the blockchain. Monero is a better currency than BTC ever will be.

Hard disagree on the second. The fact that BTC still is more valuable than others is more due to BTC having first-mover advantage and that there is too much price manipulation going on - Tether being the main culprit. Once Tether blows up, we will see people realizing how worthless BTC actually is.

Okay, maybe i misused the term and didn't explain my point well enough. To me, 'first mover' is like a brand. This help btc pricing, but when the image stop compensate the lack of utility the pricing will go down.

Despite my historic of shitting on cryptocurrency, i actually used monero and used the eth Blockchain, I'm really not anti blockchain, i just have a healthy skepticism of cryptocurrency as an investment tool.

Bitcoin only has value to transfer or store money as long as it has value. See problems with that circular logic? If faith in BTC is lost, all its value is also permanently lost. It's even worse since a lot of crypto price is driven due to speculation that it will increase in price.

This is a much worse situation than with fiat money, since there is a government and economy backing fiat, e.g. you have to pay taxes in the local fiat if you want to do business in a country.

If I magically set the value of BTC to $0.01, it will never recover. If I do the same with €, people will quickly convert to a lot of € to buy things, driving the price back up.

> Bitcoin only has value to transfer or store money as long as it has value. See problems with that circular logic

Same exact logic applies to the Euro, the thing she is in charge of shoving down everyone's throat and competes with BTC.

At the end of the day it all comes down to what soldiers and military contractors accept as payment for their services.

Currencies, like everything are backed by the power of violence.

She speaks like that because she knows that the Euro is backed by the power of violence

> the Euro is backed by the power of violence

Is it though?

I'd be willing to agree with that argument for the USD, but the Euro? Apart from a few old firecrackers in french submarines, what violence is Europe capable of exactly these days?

NATO and being best buddies with the US is important because once you remove the US, then the EU military might is clear when compared to the rest of the world ex US.

It's like when Guns n Roses had "Use Your Illusion 1" at #1 and "Use Your Illusion 2" at #2 in the Billboard.

#2 feels nice when #1 is also under your umbrella.

Isn't the value of the Euro controllable to a certain extent by monetary policy? And isn't there a large global will for that policy to encourage a stable Euro that puts people in power who do so?

It seems like an external backing force that doesn't exist with BTC.

You're assuming folks in charge of monetary policy:

    a)know what they're doing (they're not: large economies are chaotic systems, anyone pretending to know what effect pushing a lever will have is either delusional or a bald-faced liar)

    b) have an agenda that's aligned with the greater good. News at 11 : they're not. Their agenda is to stay in power.

I'd dispute point (a) partially. It's possible to have some insight and knowledge that has an at least partially predicted effect. But it is chaotic, so effectiveness is limited.

And I'm skeptical of (b), depending on your definition of "greater good". But in our context here, "greater good" means monetary stability. In this case, the power of the rich people with the money is greater than the power of whoever is in charge of monetary policy. And the people with the money want to preserve value. They will have anyone ousted who doesn't do that.

Or put another way, the best way to stay in power in the fed is to keep things going smoothly and upwardly.

Actually, the explanations for why bitcoin has value coming from different supporters is quite different, e.g. some argue it is useful as a means of payment, some argue it isn't but it will be, some argue it is only useful as a store of value. If you read "The Nature of Money" by George Ingham, you'll see that many economists think of money as something that is simultaneously: (1) A means of payment (2) a unit of account (3) a store of value. And historically, all successful currencies have been backed by a state that created demand for the currency by taxing people in it. Bitcoin is arguably doing very poorly on (1) and (2), which from a historical perspective makes it prospects look very uncertain.

Bitcoin can have value even if it's not money. So, gp's point stands.

The point was that Lagarde is a complete idiot for saying that Bitcoin has no (future) value? But, a fairly sound argument can be made that this is a plausible prediction, in part on the basis that Bitcoin is likely fail as 'money', which makes its long-term position as a 'store of value' precarious. So, I don't think the point is fair.

To become a Unit of Account, you generally need to become a Means of Payment. To become a Means of Payment, you need to be a store of value.

Why would you price a product or service in something without value? Why would you denote all prices in something that nobody is pricing in?

Your blanket argument that all successful currencies have been backed by a state is obviously wrong. Gold, Salt, Rai stones, sea shells all had value and were used as currency without governments taxing in them. Rai stones especially are a very interesting use case of money.

Writing 'state' is arguably inaccurate if you read it as 'nation state', but taxation in gold by city states goes way back to early city states and more generally gold has a very long history of being accepted as payment by governments. I'm not sure about salt. I'm not convinced Rai stones are a meaningful counterpoint -- reading about them they only appear to act as money in a fairly weak and impractical sense.

Secondly, I did not say that Bitcoin has to be money to be valuable. Rather that Bitcoin is not likely to be 'money' in any serious way, and this makes the 'store of value' proposition precarious. But I don't think it's inconceivable that bitcoin might still be worth a lot 100 years from now.

> backed by a state that created demand for the currency by taxing people in it.

As well as making it a means of commerce which means its value has to be relatively stable so people can 'figure out' what their time/stuff is worth vs someone else's value.

All crypto-currencies suffer from massive fluctuations making it difficult to value vs say a pair of jeans. It invariably gets compared to a fiat currency.

> many economists think of money as something that is simultaneously: (1) A means of payment (2) a unit of account (3) a store of value.

Just some further notes on this. The word "is" is a bit ambiguous here. To clarify, those are "properties" of money instead of what money "is made of", like a knife is sharp, while what knife actually is made of is steel. In the same way, (modern) money is debt. To have money existing means that someone owes someone something.

Now, of course, bitcoin is not debt. Nobody owes you anything if you own bitcoin. You may just be lucky to find a greater fool to sell it. And yes, someone might think it makes a better money because of that. Unfortunately for bitcoin, just like what makes a good knife is that it is sharp, a good money that is a good means of payment, good unit of account and good store of value. And by any reasonable measure bitcoin is utter failure on all of those.[1] So I find it hard to believe bitcoin will ever be money in any reasonable sense. Being good at those would require the value of money to be relatively stable against other goods, and in the current world that is just not going to happen without some mechanism actively managing the value of the money. And bitcoin has no such mechanism available by definition.

[1] If you believe in the "store of value" story, please give me a reasonable quantitative measure for judging how good a store of value an asset is, and by using that measure, compare bitcoin to more traditional store of values and show that bitcoin is not an utter failure.

> It's amazing to hear the chief of ECB make a statement so obviously and fundamentally wrong.

It's not.

Centralized entities with a govt. enforced monopoly on what they manage simply abhor competition.

A car has real value because you can scrap it and sell individual components or the metal itself. Even if asphalt roads all get destroyed tomorrow and driving becomes impossible, there’s intrinsic value in the materials.

What happens if there’s a targeted attack against Bitcoin and the network goes down or gets compromised? The only answers I’ve ever heard are “that’s very unlikely to happen”, which is not an answer. Bitcoin proponents then jump to “well, the same can happen with cash!” Which is true. But that’s why having a million in cash isn’t a good idea. Hyperinflation is unlikely, but it does happen. Crypto is the risks of cash amplified, but without the ability to walk to a store or hand a stack to your neighbor in times of need.

> What happens if there’s a targeted attack against Bitcoin and the network goes down or gets compromised? The only answers I’ve ever heard are “that’s very unlikely to happen”, which is not an answer.

Serting aside the value of bitcoin in particular for the moment, that is a totally reasonable response in my reading. It deconstructs the question instead of answering it (which of course implicitly gives an answer...), but that's totally valid. If it is indeed extremely unlikely to happen, then you shouldn't worry about it.

Then the counter is whether or not they're right in that assessment- plus all the other risks and drawbacks of bitcoin as you brought up already.

Your analogy with the car don’t make sense to me because it doesn’t seem like an apt comparison. I could ask you what you’d do if your car were obliterated by a tsunami or an explosive. There would be no intrinsic value to redeem in that case. Same if the bitcoin network goes down or is compromised.

Nothing has any value if it’s completely destroyed and whisked away 3000 miles and to the bottom of the ocean.

But you can insure a car and get paid in dollars and provided with a rental car until you purchase a new car if such a disaster does happen. Nobody is paying out insurance claims in bitcoins or for bitcoins—why that is is a total mystery. Truly bizarre that insurance companies steer so far away from crypto.

> What happens if there’s a targeted attack against Bitcoin and the network goes down or gets compromised?

What happens if we suddenly discovered massive deposits of gold under some seabed, and like shale oil boom, suddenly there is a glut of gold thus killing its price? There is not much inherent value to gold, and industrial usage definitely doesn't justify the current valuation.

Do you think gold prices are in a bubble as well because no one has answered this question satisfactorily before? If you think this is a far fetched scenario, same thing has happened to various other "stores of value" over our collective history - massive stone disks, sea shells, aluminum, ..

Gold’s price relative to other commodities will drop, but it’ll still be useful. It might even end up maintaining value since demand could rise in electronic components.

As another example, water literally falls from the sky but people still pay 2 dollars for a bottle of it.

Meanwhile, Bitcoin can’t be used for anything. It’s sole purpose is putting money in and cashing it back out for money.

You could also say stocks are worthless. That wouldn’t be wrong. You just have to hope that company doesn’t go bankrupt overnight.

Bitcoin has value today because people are willing to pay something, but that doesn’t mean it has value, intrinsically, or in the long run. Most of the crypto market is purely speculation, a bunch of people hoping that they will cash out early in the next spike. Don’t get me wrong, they can do whatever the hell they want with their money (including gamble it), but to say it has value, is much more complicated. I’d much rather an ECB boss that is conservative and doesn’t give people poor advice.

It only has value because some hundreds of TWh/year are consumed and wasted to prop its transactions. Remove the real-world impact of energy consumption vs rewards and there won't be anything left of value being consumed to prop BTC up, given that Proof-of-Stake (touted as the solution of environmental disaster of cryptocurrencies) won't be ever implemented in that protocol.

To be very reductive: it's a Ponzi-like built in burning a lot of electricity to check some random numbers.

It's worth whatever people are willing to pay for it. Simple as that.

Bureaucrats like Lagarde, or anyone for that matter, don't get to declare from their perch what does and doesn't have worth to others.

Her statements are... well, worthless... to millions of other people.

There's a difference between value today and expected value in the future. A loaf of bread has value today but I wouldn't stockpile fresh bread because I know it quickly loses value

Taleb has a paper arguing Bitcoins expected long term value is infact 0: https://arxiv.org/abs/2106.14204

> In its current version, ...

One should be vary careful about not conflating Crypto as a whole and Bitcoin. I agree with Taleb on the assessment of Bitcoins, but I think we need to wait a couple of years before we can assess the success of Crypto as a whole.

Yes, that is key. His call-out is mostly against those saying that crypto works as a "store of value", which has become the party line from BTC maxis after it has become clear that it failed as a currency.

Without a timeline, this is quite useless. Everything we know and have today will have an expected value of 0 at some point (including you)

I believe Taleb's timeline is not as long term as the heat death of the universe or end of civilisation.

He's saying that a rational market should value bitcoin at 0 because it has 0 utility. If I buy shares in Walmart I receive a dividend, if I buy shares in Amazon I know they will do share buy backs with their profits and hence increase the value of my investment.

Bitcoin has zero value or utility for me, unless I can sell it to someone else before it eventually goes to 0.

To be fair, it's the same with fiat. For every dollar there is also a dollar of debt. If all debts were paid off, you would end up with nothing, except everything we created in the real world. Now, the question shouldn't be how much value is in the accounting system, because it obviously stores nothing, it only delegates the management of the store of value in the real world. The question should be, does Bitcoin help the real world economy?

I honestly don't know but I am leaning towards no. The lightning story could in theory result in a "happy end" but I haven't seen any real successes or at least I am not being made aware of them. After all, El Salvador isn't the success story that everyone hoped for.

> The question should be, does Bitcoin help the real world economy?

That's a fine question too and I would argue that it doesn't help the real world economy. It just consumes energy for 0 utility except to facilitate ponzi schemes and money laundering

Same Lagarde four years ago: "'Fight fire with fire': IMF's Lagarde calls for bitcoin crackdown"

https://www.theguardian.com/technology/2018/mar/13/imf-chris...

Also from the article...

"... ..Lagarde revealed she had never invested in crypto assets, but her son had — with little luck...A digital euro, however, would be an entirely different ball game, Lagarde explained..."

"...The day when we have the central bank digital currency, any digital euro, I will guarantee it," she said. "So the central bank will be behind it. I think that is vastly different from any of those things..."

A digital Euro (or whatever other currencies, the acronym escapes me right now) doesn’t really have all that many similarities to cryptocurrency.

I believe the term you are looking for is Central Bank Digital Currency (CBDC) [0].

I agree they are unrelated to cryptocurrencies.

[0] https://en.wikipedia.org/wiki/Central_bank_digital_currency

Yep, that’s the one!

A crypto-euro would of course be "an an entirely different ball game" because what else do eurocrats yearn for if not the holy grail of dystopian surveillance power, with it's "blockchain" being a centralized DB with every single financial transaction of yours.

Don't get with the programme du jour? Let's see how much you dare to dissent the latest decree if your ability to pay anything can be eclipsed by a mouse-click. Let alone retrieving any of your savings.

Awesome. I'll buy all the bitcoin you have at twenty grand a coin then.

It's not even good propaganda, they've been waffling for over a decade now. You're just full of shit and everyone knows it.

Mathematically, that's a pretty strong argument, since Bitcoin might be worth something like. $0.000001 USD which is still not nothing.

I think a single bitcoin is worth about as much as someone interested in owning a piece of financial history, libertarian art and/or a token of mass psychosis would be willing to pay for one of 21 million of them.

I think people would pay ~10 USD give or take an order of magnitude, for such a curiosity.

There is no point is talking about a "single" bitcoin. It's about the network. To have people paying 10USD for a coin would imply that there are people keeping at least 210M USD worth of mining equipment running 24/7.

How do you get 210M USD from 10 USD? Not a rhetorical question, I'm interested in how the maths works. Are you using the dollar amount to guess how many miners would be active, and where exactly do all the numbers to do that come from?

Probably the cost of operating the computing resources for a functioning network ?

GP obviously did "21 millions bitcoins ever mined at most times 10 USD a piece", which gives 210 M. No idea if that's correct or not from a game-theory standpoint. All I know is no matter your mining power and no matter if you own 50%+1 of the network or 100% of the network or 0% of the network: this doesn't give you the right to sign transactions moving coins you don't own the private keys to.

You are right that I just multiplied one number by the other, but you got me thinking about what would happen if the BTC network collapsed and we had all the people saying "I would pay X dollars to have one as a collectors item".

One could think to that without the BTC network, and just run an exchange of the private keys. But if you just "sell" a the private key, couldn't you just keep a copy? Wouldn't you be able to do a double spend, and sell the keys to different people? So, the only way to prove that you own the coins is by moving them a wallet that only you control. That implies that the network still needs to be alive and secure.

In short, if the BTC network collapses, the price will go to zero. There is no way around it. There is no "I'm willing to pay X for one".

On other hand bitcoin will always have non-zero cost to operate. Even if it goes back to CPU mining someone has to keep computer with the blockchain stored running somewhere for it to exist...

She must be being facetious, because what is the Euro?

It's simply a made-up unit of account that everyone (currently) agrees can be exchanged for good and services, and other units of account (currencies). If her argument is that governments will 'back up' the currency, what will they back it up with? More of the currency? Basically the Euro is 'worth' nothing too, it's only trust.

Even though I'm not much of a fan of crypto, it's essentially the same, it's just trust, though cryptos maybe have shakier foundations, and could implode with no-one even attempting to maintain their value.

The big difference might be that states can 'back up' their currency by forcing citizens (with violence) to accept, and pay in their currency.

An imposed delusion, rather than a shared delusion, perhaps.

ECB is scared. These people will lie to keep control. Crazy.

Or they want their citizens to avoid investing in a ponzi scheme which steals their hard earned cash?

Full quote from the article:

My very humble assessment is that it is worth nothing. It is based on nothing, there is no underlying assets to act as an anchor of safety.

'Don't hold back'

May 21st, interesting... the views appear to be quite outdated.

> A digital euro, however, would be an entirely different ball game

There exists quite a number of different EUR stable coin projects out there.

Most of the active Crypto community have already abandoned Bitcoin. Heck, for more than a year the the hype has been on dApps.

Yeah yeah. We've been hearing this over and over - especially in bear markets - yet crypto is not only still around but it is also getting relentlessly adopted.

She would know, she's after all in charge of the ECB, whose sole purpose is to promote and manage the use of another entirely worthless commodity.

Bitcoin is worth something exactly because of people like Lagarde. It is our insurance against them.

My favorite thing about these kind of statement, is seeing cryptobros reeeeeeeeing.

It is the other way round. The 'crypto-bros' are actually laughing at her as she is the one 'reeeeing' because she and the ECB knows that they cannot stop all of them and their only option is to put in regulations for tolerating a few compliant crypto assets.

For absolutist statements like her's, the only reason they are doing that is to promote their own digital euro in the form of a CBDC, which is good timing when a crash in the crypto markets happen.

I don't get it. What is a "digital euro"? Aren't most euros already digital?

When you see cryptobros reeing, it's a great opportunity to buy a little, so that you don't drool on the sides during the next run.

> It is our insurance against them.

How?

They can't block your crypto account/wallet like they did with bank accounts in Greece, Cyprus, Iceland etc. https://en.wikipedia.org/wiki/Capital_controls_in_Greece

Even only this is enough, but there are many more ways this insurance works.

Ahh the continued bs that any of this junk is decentralized.

99% of this junk operates within centralized exchanges who can be forced to close it down and have a disproportionate level of influence on the currency itself.

It can be, and may do so under extremely small volumes, but the vast majority of people interact with this in a centralized fashion.

Yeah, it can hurt the price (as the implosion of LUNA/UST did). Of course. Will it obliterate it? I really doubt it. The main case (to resist the government) will even be strengthened if such a thing happens.

> ”there is no underlying assets to act as an anchor of safety.”

As opposed to the Euro. Right?

The underlying asset for euro's is debt. There's a lot to argue about whether debt makes a good asset for this purpose, but at least there's something. If you have a euro, somewhere, a debtor is obligated to give you a euro of value.

There is no such obligation for bitcoin.

That's nice, I hope that means that they still stop taxing crypto!

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