The promise of Bitcoin falters?

Bitcoin banknote
I’m all for the creation of an online currency. As we heard on e.g. this Cato podcast, the benefits of sending money for free on the Internet are huge, especially for poorer people who currently have to use money transfer firms. For ecommerce overall, relying on digital currencies and taking out the card transaction fees would enable vendors to lower prices further, benefiting all.

However, there are more and more signs that Bitcoin might not be it. First of all, the price would need to stabilize, which it doesn’t show any sign of doing. The price is now down below $500 from being above $1,000 less than 2 months ago. Second, it doesn’t seem to be ready for mainstream usage, given the recent news about Mt Gox closing down, possible due to insolvency. The unfortunate truth is that Bitcoin did start gaining popular momentum only after it was featured in the story about Silk Road being shut down. Bitcoin has felt somewhat a part of the global liquidity boosting trend, with the Fed’s QE money finding somewhere to be invested.

The future would look brighter if we had functioning digital currencies, but there is a long way to go.

Picture by CASASCIUS (CASASCIUS) [CC-BY-3.0 (http://creativecommons.org/licenses/by/3.0)%5D, via Wikimedia Commons

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