Principal Global Investors CEO: Bitcoin lacks fundamental value and it won't replace gold

Business Insider's Sara Silverstein recently spoke with the CEO of Principal Global Investors Jim McCaughan about bitcoin's volatility and its future as a currency. McCaughan believes bitcoin's volatility is due to its lack of fundamental value. He thinks bitcoin has become a temporary substitute for gold but doesn't believe it will displace it in the long run. Following is a transcript of the video.

Sara Silverstein: I have to ask about bitcoin. What do you think and what do you think people don't understand?

McCaughan: Well, I'm not sure any of us really understand it, because things will come through over the next few years. It's a big enough phenomenon to be quite important. The thing I'd say about bitcoin is - there is no fundamental value. It could just as easily double as it could go to zero. It did an enormous rise last year; it's roughly halved in the last couple of weeks. This is not a surprising behavior. From $10,000, it could go to near zero, and it could go easily up to well beyond its previous high, just because there's no fundamental value there. But there could be fundamental value in the future if it became, for example, a medium of exchange - a real coin. But I would argue that with all the funds that have been set up, all the financial instruments using bitcoin, the prospect of it becoming a medium of exchange is more distant now than it was. So I think the fundamentals don't look very good for creating any fundamental value in bitcoin. It's become a kind of substitute for gold, but at the moment, it doesn't look like it will displace it.

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