“The Times” claims that “Bitcoin and Ethereum are volatile because supply is controlled by those who hold the coins”

The article titled “Bank of England beefs up plans for digital ‘Britcoin’ currency” by The Times, published on April 5, 2021, includes a statement regarding Bitcoin and Ethereum’s volatility that requires fact-checking. The article claims that “Bitcoin and Ethereum are volatile because supply is controlled by those who hold the coins.”

This statement is not accurate  and it is misleading. While it is true that the supply of Bitcoin and Ethereum is limited, and that the market value of cryptocurrencies can be volatile, the volatility of these assets is primarily driven by demand and market forces, rather than the supply being controlled by those who hold the coins.

Bitcoin and Ethereum operate on a decentralized network, where supply is programmed into the protocol and is not controlled by any single entity or individual. The total supply of Bitcoin is limited to 21 million, and the supply of Ethereum is limited by an annual cap on the amount of new tokens that can be created through mining. The limited supply of both cryptocurrencies is a deliberate design feature, intended to prevent inflation and maintain the value of the currency over time.

However, the volatility of cryptocurrencies is primarily driven by factors such as market demand, regulatory changes, and media coverage, rather than the supply being controlled by those who hold the coins. For example, the value of Bitcoin and other cryptocurrencies can be affected by factors such as changes in government regulations, media coverage, and market speculation.

It is also worth noting that the supply of cryptocurrencies can be influenced by mining, which is the process by which new coins are created and added to the blockchain. However, the mining process is open to anyone with the required computing power, and the rewards for mining are controlled by the protocol, rather than any single entity or individual.

In summary, the claim made in the article that “Bitcoin and Ethereum are volatile because supply is controlled by those who hold the coins” is not accurate. While the supply of cryptocurrencies is limited, the market value of these assets is primarily driven by demand and market forces, rather than the supply being controlled by those who hold the coins.