Bank of England’s Chief Economist Thinks Bitcoin Could Replace Cash

It took bitcoin an 85 percent crash followed by a 135 percent recovery to convince a prominent financial expert about its underlying potential.

Andrew G Haldane, the chief economist of the Bank of England, said bitcoin is on its way to replace cash, according to an eyewitness’s account. The 51-year academic made the statement when he was interacting with an audience of students. One of them asked Haldane about his thoughts on the future of cryptocurrencies. Haldane replied that he believed bitcoin, in particular, would become as relevant as cash in the next 20-30 years.

“Mr. Haldane said it [bitcoin] could replace cash, he even joked about us likely having Bitcoin in our wallets,” the witness shared on Reddit. “He said he didn’t think it’d replace cash tomorrow, but he was quite open to the idea 20 or 30 years down the line. He was also quite familiar with cryptocurrencies and joked that there were now thousands of them.”

The Bitcoin Price Recovery

Haldane’s statement appeared in contrast with Haldane’s earlier take on bitcoin. The economist in March 2018 had issued a warning to investors about the dangers of investing in cryptocurrencies. At the same time, he had stated that bitcoin was not a threat to the existing banking system, arguing that the cryptocurrency was not scalable and did not even make 1 percent of the global wealth.

Haldane’s anti-bitcoin statement also came at the time of mass crypto panic. The market was correcting violently to the downside after establishing an overbought peak at $813.87 billion. The bitcoin price, too, dropped by more than 70 percent between January and March 2018 trading session to settle a Q1/2018 low towards $5,873. The rate eventually went as low as $3,100 on December 15, 2018. Nevertheless, it recovered by 135 percent as of May 18, 2019, 1220 UTC.

The 2018’s crash brought the cryptocurrency market on the verge of extinction. Firms fired employees and closed their shutters down permanently, scammers disappeared with massive investments, speculators and investors moved away to focus on the mainstream asset classes, and analysts turned mum on failed bitcoin price predictions. Only true believers continued building and improving the Bitcoin protocol, and attracting mainstream investors. The efforts renewed buying sentiment in the bitcoin market. The result was an astounding price recovery.

The Shifting Sentiments

The bitcoin price rebound helped a few bitcoin skeptics like Haldane realize its long-term potential. The Australian Financial Review reported on March 6, 2019, that a renowned economic historian, Niall Ferguson, turned from a bitcoin agnostic to a bitcoin believer.

“I was very wrong. Wrong to think there was no use for a form of currency based on blockchain technology,” Ferguson told AFR.

Nevertheless, there are also many who refused to change their perspective about bitcoin despite its survival as a technology and an asset for over a decade. Legendary investor Warren Buffett thinks Bitcoin is a Ponzi scheme while Nobel prize winner Joseph Stiglitz believes it should be made illegal globally. At the same time, the economist who predicted the 2008 economic crisis, Nouriel Roubini, calls bitcoin “a mother and a father of all scams.”

But the skepticism did not deviate major Wall Street firms to explore bitcoin. Fidelity Investments, a Boston-based asset management firm, announced that it would introduce bitcoin trading services to its institutional clients. TD Ameritrade, another US firm, proposed to trial a similar service, further indicating that investors are willing to explore the vastly unexplored opportunities in the cryptocurrency industry.