Why Bitcoin won’t be the money of the future – but cryptocurrencies might be
Proponents of Bitcoin like to suggest that it will be the money of the future. Critics point to its price volatility, evidence of a Bitcoin bubble and other problems. With the price of Bitcoin having just fallen below $500 for the first time since May, both sides make valid points.
Will Bitcoin be the innovation that transcends state money that has let us down so badly over the last 70 years? Probably not.
Bitcoin certainly has some of the characteristics of successful money. It is becoming fairly widely acceptable, even if it is not generally so.
The big problem with Bitcoin, however, is that it is an unreliable store of value. Take what happened in 2013. Bitcoin’s value on 8 April of that year was $215. It was $63 eight days later and $1,200 seven months later.
There are, however, more fundamental problems that cause the value of Bitcoin to fluctuate. The algorithm that controls supply prevents the amount of Bitcoin from expanding to meet increases in demand.
The most likely scenario is that Bitcoin will eventually be displaced by better cryptocurrencies, and that these would avoid the boom-bust cycle to which Bitcoin is prone. We will be using these cryptocurrencies on the super-smartphones of the future or whatever replaces them, and the demand for government money might disappear altogether.
So is Bitcoin the money of the future? Probably not, but cryptocurrencies might be.
Source: cityam
