Joe Davis, Chief Economist for Vanguard, one of the world’s largest asset managers overseeing a combined $5.1 trillion in assets, believes that cryptocurrency has little to no use cases, are incredibly risky, and that there is a “decent probability” bitcoin’s value may plummet to zero eventually.
Despite the harsh words for bitcoin and like cryptocurrencies, Davis and Vanguard remain “enthusiastic” over blockchain technology. Davis made the following statement in an ETF industry perspective analysis titled ‘Vanguard: Bitcoin Presents A Quandary’:
“I’m enthusiastic about the blockchain technology that makes bitcoin possible. In fact, Vanguard is using such technology. As for bitcoin the currency? I see a decent probability that its price goes to zero.”
According to Davis, bitcoin should not be classified as “money” because even though it does provide a unit for accounting and means of exchange, it does not work as a store of value due to the substantial price volatility, saying it “undermines its adoption, as fewer vendors will accept a currency whose value can fluctuate so dramatically.”
Davis also thinks that cryptocurrencies are not worthy investments, warning investors that investing in crypto will reduce exposure to “tried and true asset classes” such as stocks and bonds, adding:
“The investment case for cryptocurrencies is weak. Unlike stocks and bonds, currencies generate no cash flows such as interest payments or dividends that can explain their prices. National currencies derive their prices from the underlying economic activity of the countries that issue them. Cryptocurrency prices, on the other hand, are generally not based on economic fundamentals. To date, their prices have depended more on speculation about their eventual adoption and use.”
The chief Vanguard economist ended his analysis with final blow to bitcoin, using the oft-heard tulip-mania comparison, adding that cryptocurrencies, “unlike tulips, they don’t look very nice in a case.”