30.07.2021

Irish Central Bank Governor calls Bitcoin a dangerous asset for investors

The sharp rise in the price of Bitcoin has caused strong concern about what is happening in the cryptocurrency market from the Governor of the Central Bank of Ireland.

Gabriel Makhlouf, who is also a member of the governing board of the European Central Bank, warned the public about the risks of cryptocurrency investments on the air of the Bloomberg TV platform. The banker mentioned the recent warning from the UK Financial Conduct Authority regarding digital assets and was generally extremely negative towards Bitcoin. Let’s talk about the situation in more detail.

Note that criticism of Bitcoin and other cryptocurrencies from bankers and officials can be understood in different ways. First of all, coins are really too volatile, that is, their rates change sharply and actively. For ordinary investors without understanding the peculiarities of the blockchain industry, this may not work and end up with an emotional sale of assets in the red. However, such fluctuations occur in both directions, so you can get used to them.

The second point of view is much more interesting. Many cryptocurrencies are decentralized, that is, they work due to the presence of participants in their network. Well, this eliminates the role of an intermediate chain between users, which a bank performs in ordinary finance. Thus, financial institutions lose their powers and cannot do anything about it. And this is also a serious reason for criticism of Bitcoin and other coins from their side – albeit not entirely honest.

Bitcoin started the day today at $ 34,242, up 1.6 percent from a day ago. The trading volume for the last day was $ 47 billion, which is quite modest against the background of the total BTC capitalization of 636 billion. Here is a graph of the asset’s behavior over the past two weeks.

Should you buy Bitcoin?

The representative of the financial institution was indeed categorical in his statements. Here is one of Makhlouf’s quotes from an interview, in which he warned cryptocurrency investors about the need to be ready to lose all funds. The replica is given by Cointelegraph.

As the UK Financial Conduct Authority stated a few weeks ago, if people want to invest in bitcoins, they must be prepared to lose all their money. This is definitely my point of view.

We believe that this position is no longer relevant. Over the twelve years of its existence, the cryptocurrency has proven its relevance and has attracted a huge number of fans, which are becoming more and more every day. And even if due to some unforeseen event – like the March collapse last year – Bitcoin collapses, there will certainly be those who want to buy it “at a discount.” And this, in principle, destroys the possibility of losing all the money on Bitcoin.

At the same time, there are indeed fraudulent projects in the industry where you can lose the entire investment amount. An example is CBDAO Bree, which we mentioned in a separate article.

Consumer protection is currently the most important concern of local regulators, Makhlouf said, as investors clearly view bitcoin-like cryptocurrencies as investment assets. And despite growing concerns about investor safety, Makhlouf seemed confident that cryptocurrencies did not pose a threat to global financial stability. He continues.

Personally, I don’t understand why people invest in such assets, but they clearly see investment potential in them. Our role is to ensure consumer protection. I see this as our main task and am not sure that financial stability will have problems with Bitcoin at the moment. I am more concerned about consumers making the right choice.

In Bitcoin, it’s really easy to consider the investment potential. The maximum amount of cryptocurrency is limited to 21 million coins, and large companies are actively buying them. And even a combination of these two factors is enough to get interested in a coin.

However, billionaire Mike Novogratz, who once made a fortune on Bitcoin, disagrees with Makhlouf’s opinion. Here’s what he tweeted.

I’m tired of such comments. It is not true. Yes, it is a very volatile asset and if you buy with leverage it is very risky. But without leverage, you won’t lose all your money. BTC is a macro asset.

Indeed, trading – especially for beginners – can end up with large losses. Bad trades happen quite often when trading.

We believe that in the case of Gabriel Makhlouf, he simply lacks an understanding of the digital asset industry. At the same time, in general, this situation in the world is now being corrected, which is proved by large companies investing hundreds of millions of dollars in the same Bitcoin. Therefore, the words of the banker do not indicate the lack of prospects for the cryptocurrency – it is just that, due to lack of desire, he has not yet found them. However, it will still be possible to wait.

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