While Bitcoins may not be the ‘Tulip’ bulbs of the 2020s, a better comparison may be to that of a sparkling and shooting star – alluring people – attracting investment, even as it flickers. Many orthodox economists believe it’s a comet that will vaporise.
The future will judge whether it’s a star or a comet.
Fails every measure of a currency
Over two crore enthusiastic Indian investors (mostly young, many with high-risk tolerance) are ‘invested’ in cryptos. India has about 500 startups ‘operating’ in cryptocurrencies and over Rs 25,000 crores is at stake.
Most of those who trade in cryptocurrencies, especially those who have ‘made’ money, advocate cryptos, particularly Bitcoin, to be a great currency, and the future of money. May be so, but in the future.
As a currency it has no history of being accepted as money, nor a chance of the sovereigns allowing it to be one. It lacks several key currency attributes, for example the time-tested store of value (intrinsic worth), in which aspect it has failed miserably. It fails several other standards too. For the retail, the transaction cost is high, prolonging the transactions. The transactions are also tedious, slow and cumbersome. In addition, there is a hint of uncertainty, even insecurity to the transaction and the process. The absence of financial and legal ‘backing’ only accentuates the uncertainty. Bitcoin cannot buy a car, pay someone’s tuition fee or pay for a house. Nor can it buy a meal, or a cup of coffee. Let’s say, it’s not transaction friendly.
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