Since it’s inception in 2010, Bitcoin has been the subject of a great deal of spilled digital ink. The idea of a currency outside of the control of governments has been the dream of libertarians and an interesting idea for many fiscal conservatives. However, as much as Bitcoin brought to the table, it missed a very important variable.
That variable is volatility. As long as the price of Bitcoin remains as volatile as it is, it will not assume a place as a truly viable currency. People will not tolerate the sharp rise and fall in prices of a currency. Period. Won’t happen.
Imagine if the purchasing power of your dollars rose and fell by double digits within a few days or weeks on a regular basis. You’d search for some form of stability in any money you held beyond a few days. In other words, you would not trust the short term store of value attribute of your money and you would seek an alternative.
Today, we have national currencies that are relatively stable compared to Bitcoin. If those national currencies began to fluctuate because of financial system instability and burdensome sovereign debt, would Bitcoin become a viable currency? Not likely. It is too ill liquid and thus in that scenario, the volatility of the Bitcoin price would make today’s price fluctuations pale in comparison.
Gold and silver prices, while experiencing periods of volatility, would provide a stabilizing factor to the overall purchasing power of your savings. That’s why we do what we do. Accumulate gold and silver. Protect your retirement funds.
Bitcoin gave us the blockchain, which will revolutionize industries across the board. It opened our minds as to the possibilities of what money can and should be. As a currency however, it will likely struggle to find a viable, long term place in our present monetary system. In a future monetary system? That could be a different story.