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Last Updated: 29 July 2022

Igor Makarov, a finance professor at the London School of Economics (LSE), cannot imagine a future without digital assets but has doubts about bitcoin. According to Makarov, bitcoin is far from perfect, and there is little evidence that it functions as a store of value.

Can bitcoin succeed as a store of value?

According to Makarov, the past 10 years have not provided evidence that bitcoin has what it takes to become a store of value. In particular, the volatility of the bitcoin exchange rate makes Makarov think this is unlikely. “If the huge increases in value and increase in liquidity fail to make bitcoin more stable, then there is no guarantee that bitcoin will ever become stable,” Makarov said.

“Without a government to cover bitcoin, its value relies on the public’s willingness to hold bitcoin. That, in turn, relies on changing sentiment among investors and the value of bitcoin relative to other cryptocurrencies,” Makarov continued.

According to Makarov, if US sovereign wealth funds are allowed to invest in bitcoin, it will certainly give the bitcoin price a “temporary boost.” However, that boost in value means that “early entrants will benefit at the expense of the people” and other store of values, especially fiat money, Makarov said.

0.01 percent have 5 million bitcoin

Makarov has become known as the co-author of a study that claims a small group of 10,000 bitcoiners hold 5 million bitcoin. That would mean that 0.01 percent of all bitcoiners own 25 percent of all 19.1 million bitcoin. The researchers claim that the largest bitcoin holders own a larger percentage of all crypto than the richest Americans when it comes to dollars.

According to Makarov, the research is based on data from the Bitcoin network as well as public data from blogs, chat forums, and other sources. “We also use Bitfury Crystal Blockchain information on the identity of large public entities like exchanges,” Makarov said.

In a comparison with the traditional financial system, Makarov says that people there have their money mainly in real estate and stocks. The majority of wealthy people do not have the bulk of their assets in US dollars. Despite being skeptical about bitcoin, Makarov is positive about the future of digital assets.

The money of the future is digital

Makarov does not currently own any cryptocurrencies, but he definitely sees digital money as the future. “There is little doubt that we will use digital money and digital assets in the future. The efficiency of that depends on the design. That is why it is important to get that right,” Makarov says of digital money, among other things.

Makarov also thinks it is important to tackle problems such as governance and legislation in time and to find a good solution for them. What we see a lot now is that crypto projects live in a grey area. This is a situation that creates a lot of uncertainty for both entrepreneurs and private individuals.

If we can go by Makarov’s criticism, he probably does not see bitcoin as the money of the future. Partly because of the unfair distribution that Makarov apparently sees as a major obstacle to the global adoption of bitcoin as money.

  • Ivan Brightly

    Ivan Brightly is a leading cryptocurrency analyst and author with over 5 years of experience in the blockchain and digital asset space. He previously served as a senior analyst at a major cryptocurrency hedge fund where he led quantitative research and trading strategy development.

    Ivan holds a Master's degree in Finance from the London School of Economics and a Bachelor's in Computer Science from Stanford University. He is frequently invited to speak at fintech and blockchain conferences worldwide on topics spanning cryptocurrency trading, blockchain technology, and the future of digital assets.

    Ivan's commentary has been featured in several major finance and technology publications including Forbes, Bloomberg, and CoinDesk. He is considered one of the most insightful voices analyzing new developments in the cryptocurrency and blockchain industry.

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