This is a rather strange statement, at first sight, recently made by François Villeroy de Galhau, the Governor of the Banque de France. The latter compares the current speculation around Bitcoin to tulipomania. But, besides, what is tulipomania?
It is simply about the first great speculative bubble in modern history. Indeed, in the 17th century, a sudden and powerful craze took place for Dutch tulips. To give you an idea: a tulip could be worth as much as a house! The rest, you can imagine: the course collapsed and a real first stock market crash took place in 1634. This is therefore what French Villeroy de Galhau compares, the craze around Bitcoin. Nevertheless, what can we think of the legitimacy of these remarks in relation to his current position? Indeed, Bitcoin directly competes with national currencies…
The Fear of Bitcoin Volatility and Opacity
Behind this announcement hides a real fundamental problem: Bitcoin turns out to be a very volatile cryptocurrency. Due to its youth (it was created in 2009), it is quite logical that its price varies so much over the months or years. Nevertheless, one could easily think that this should stabilize over time, but the question that one can ask is… When?
Moreover, a bitcoin payment turns out to be fully encrypted : it is impossible to go back to the source as for a simple transfer or a payment by credit card. This is also what scares the Banque de France (and it is completely legitimate). Moreover, it is not uncommon to sometimes hear about illegal fund transfers or from potential terrorists via Bitcoin. Short, this currency turns out to be quite opaque, and this is, despite everything, what makes it its strength, especially with the blockchain. It’s quite surprising in the end: it’s both a strength and a weakness!
Virtual currencies for central banks
To go a little further, let’s not forget that central banks want to create their own virtual currencies. In Europe, an e-Euro could appear within a few years. Moreover, this is already the case in China, which is currently carrying out some tests on a virtual currency in certain regions of the country. In short, whatever it is, Bitcoin presents itself as a real competitor to these future currencies. Let’s face it, this is something quite unprecedented in our recent history.
Finally, the loss of control over the currency system also worries central banks. Indeed, if Bitcoin is used more than the future e-euros or e-yuan, banks will no longer have control over transactions: everything will go through the blockchain set up by the cryptocurrency.
In short, beyond speculation, Bitcoin is currently changing the world order of currencies. All the indicators are, to date, green. It is certain that speculation is present in the use of this currency. However, the big difference with Holland tulips is that there will only be a limited number of bitcoins. And this was announced by its creator since the launch of the cryptocurrency.