Bitcoin and cryptocurrencies saw a sharp sell-off this week, despite an audacious plan to bolster the bitcoin price.
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The bitcoin price has lost around 10% over the past week—with ethereum, cardano, Binance's BNB, Ripple's XRP and the meme-based dogecoin recording even sharper falls—even as the country of El Salvador formerly adopted bitcoin as legal tender and banking giant Standard Chartered predicted the bitcoin and ethereum price could be about to explode.
Now, two high-profile central bankers have warned bitcoin and other cryptocurrencies are at risk of collapsing and are not "a good safeguard of value."
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"Private money usually collapses sooner or later," Riksbank governor Stefan Ingves said at a banking conference in Stockholm, it was first reported by Bloomberg. "And sure, you can get rich by trading in bitcoin, but it’s comparable to trading in stamps."
Meanwhile, Bank of Mexico governor Alejandro Diaz de Leon said bitcoin is more like a means of barter than "evolved" fiat money, calling it a high-risk investment and a poor store of value due to its wild price swings.
The bitcoin price has added a massive 350% over the last 12 months but investors have needed strong stomachs—bitcoin on Tuesday alone dropped by almost 20% before rebounding. Combined, the entire cryptocurrency market has surged around 170% since January, with much of that coming from rises seen in ethereum, cardano, solana, BNB, XRP and dogecoin.
"Whoever receives bitcoin in exchange for a good or service, we believe that is more akin to bartering because that person is exchanging a good for a good, but not really money for a good," Reuters quoted Diaz de Leon as saying, with his comments pouring cold water on suggestions Mexico could follow El Salvador in adopting bitcoin as an official currency.
"People will not want their purchasing power, their salary to go up or down 10% from one day to another. You don’t want that volatility for purchasing power. In that sense, it is not a good safeguard of value."
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The duel central banker alert comes after analysts at banking giant JPMorgan
"The previous phase of retail investors’ mania into cryptocurrency markets was between the beginning of January and mid-May... and retail investors are making cryptocurrency markets look frothy again," wrote JPMorgan researchers led by managing director Nikolaos Panigirtzoglou.