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Bitcoin Creators Don't Understand Enough to Replace The Dollar

Replace The Dollar
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EDITOR NOTE: There are many issues that make the dollar a problematic asset. As a gold investor, you probably have your list of reasons why you prefer to “stabilize” your wealth through gold and silver. Bitcoin holders--or rather HODLRs (the longer-term holders)--will say the same about the dollar in relation to bitcoin and other cryptocurrencies. But can bitcoin ever replace the dollar? Does bitcoin have better “price stability” compared to the dollar? That’s a rhetorical question, and a funny one at that because all it takes is one look at bitcoin’s price volatility to make the dollar look stable--so stable, in fact, that the dollar will appear not to be moving. Might bitcoin’s inelastic (or limited) supply be preferable to the dollar’s supply manipulations? Think about that for a moment. And if the dollar is backed by nothing other than the US government and the Fed, what’s backing bitcoin--vendor/holder adoption for transactional use (not really)? Might it be backed by speculators seeking alternative portfolio growth based on the actions of other speculators? If so, where is the “money” aspect in all of this?

If you’re reading this piece, you likely already know that El Salvador recently decreed Bitcoin legal tender. The dollar will similarly continue as legal currency in the Central American nation.

Word has it that Bitcoin will enable much easier and safer remittances from Salvadorans working outside the country. The giant leap for the once obscure medium doubtlessly has some crypto-optimists with stars in their eyes about the future of decentralized money. El Salvador is the surely the beginning of increasingly common Bitcoin circulation.

The enthusiasts would be wise to curb their enthusiasm.

Bitcoin’s not about to replace the dollar, or any other broadly circulated money form. While there’s much to dislike about the dollar, Bitcoin’s creator(s) don’t know why the greenback is disliked.

To the reflexively libertarian in our midst who aren’t quite sure why they’re libertarian, Bitcoin is logically superior because it’s not “government money.” Fair enough, at first glance. Except that the lack of trust in the dollar is not because it’s government money; rather more than a few disdain the greenback because it lacks stability as a measure. More than that, they hate when the dollar is devalued. Stop and think about it.

Originally posted on Forbes

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