Is Bitcoin a Real Currency? An economic appraisal
AbstractA bona fide currency functions as a medium of exchange, a store of value, and a unit of account, but bitcoin largely fails to satisfy these criteria. Bitcoin has achieved only scant consumer transaction volume, with an average well below one daily transaction for the few merchants who accept it. Its volatility is greatly higher than the volatilities of widely used currencies, imposing large short-term risk upon users. Bitcoin’s daily exchange rates exhibit virtually zero correlation with widely used currencies and with gold, making bitcoin useless for risk management and exceedingly difficult for its owners to hedge. Bitcoin prices of consumer goods require many decimal places with leading zeros, which is disconcerting to retail market participants. Bitcoin faces daily hacking and theft risks, lacks access to a banking system with deposit insurance, and it is not used to denominate consumer credit or loan contracts. Bitcoin appears to behave more like a speculative investment than a currency.
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Date of creation: Dec 2013
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Find related papers by JEL classification:
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
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- Bouoiyour, Jamal & Selmi, Refk, 2014.
"What Does Crypto-currency Look Like? Gaining Insight into Bitcoin Phenomenon,"
57907, University Library of Munich, Germany.
- Bouoiyour, Jamal & Selmi, Refk, 2014. "What Does Crypto-currency Look Like? Gaining Insight into Bitcoin Phenomenon," MPRA Paper 58133, University Library of Munich, Germany.
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