Steve H. Hanke, Professor of Applied Economics at Johns Hopkins University, has invested in Bitcoin (BTC), the world’s largest and largest cryptocurrency by market capitalization.
According to him, “Bitcoin cops hate discussing Bitcoin’s flaws.” But while he can agree that “cryptocurrencies are the future of money,” he says Bitcoin is not.
Over the years, many have tried to investigate Bitcoin’s shortcomings, ranging from its potential volatility to its high energy consumption triggered by its mining activities. However, these shortcomings have done little to reduce its attractiveness over the years, as the cryptocurrency has seen a parabolic rise in price and valuation, making it the sixth most important commodity in the world.
Based on some of these shortcomings, Prof. Hanke noted that because of its volatile and unpredictable price fluctuations, Bitcoin has no inherent potential to be used as legal tender.
“Since the source code of Bitcoin dictates that the supply of Bitcoin will ultimately be fixed and completely inelastic, all market adjustments can only be made through price changes and not through changes in quantity. As a result, it is inherently exposed to extreme price volatility. This means that Bitcoin will never serve as a reliable unit of account. You will rarely see items with Bitcoin price tags, ”he said.
Hanke also noted that Bitcoin’s volatility makes it unattractive to most corporate investors, regardless of how big multinational companies like Tesla are betting on the coin. He believes that holding Bitcoin as reserve assets poses a risk to shareholders’ funds, a position Michael Saylor particularly opposes.
While Bitcoin’s shortcomings make it inappropriate, as he said, Hanke believes that other relatively stable digital currencies are innovative but fraught with problems. However, he believes that cryptocurrencies issued under the supervision of a cryptocurrency committee have the potential to displace Bitcoin in the long term.
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