Economist reveals bitter prospects if Bitcoin should ever become a global success
Jon Danielsson, a lecturer at the London School of Economics, argues that bitcoin and fiat currency cannot coexist. Danielsson claims: The concept of Bitcoin as money makes no sense.
Moreover, should he ever prevail, he foresees a world of great inequality – something that, he suggests, contradicts the egalitarian principle.
Fortunately, the more successful Bitcoin gets, the more perverse consequences and internal contradictions that become more and more visible, with Bitcoin and other cryptocurrencies being scrapped long before we get to that point. At this point the price of Bitcoin will go to zero. “
Bitcoin continues to cause controversy
A record breaking month saw Bitcoin reach $ 58k for the first time in its history. While a drop this week has torn the market, it’s important to note that fundamentals remain solid.
If anything, they are getting stronger and stronger, as the lively interest of institutions in recent weeks shows. Or more recently, Coinbase’s S-1 filing, which many are predicting will add an element of legitimacy to cryptocurrency.
Still, despite its successes, Bitcoin still attracts its share of hatred and skepticism. Perhaps to a lesser extent after nearly tripling in value since December.
People who previously dismissed it as worthless fall into two camps. Those who are reevaluating and willing to learn more – and those who cling to outdated ideas and principles by re-emphasizing their skepticism.
Danielsson falls into the latter camp. Like many economists who study Bitcoin, Danielsson looks at the leading cryptocurrency through an „old-fashioned“ lens. It overlooks several basic principles.
For example, the comparison of overnight money (M1) with Bitcoin has no basis. Few merchants accept Bitcoin directly because it is too slow and expensive to trade with. However, service providers such as BitPay offer a brokerage service to convert cryptocurrencies into fiat at the point of sale.
Inefficiency as a medium of exchange should not diminish its overall value. Just as retailers don’t accept gold, then it makes no sense to say that gold will go to zero on that basis.
Danielsson paints a hypothetical situation in which Bitcoin manages to eat up the market capitalization of all the world’s assets, fueling an even greater divide between the haves and the have-nots.
No satisfactory answer can be given to this scenario. However, in such a situation the world would be a very different place and Bitcoin should not be held responsible for those who refuse to adapt to change.
Bitcoin is an emerging technology that doesn’t fit the classic definitions of money in economic theory. As a decentralized and permission-free network, his endeavor is far more important than the mere exchange of values, as is the case with money.
Perhaps the bigger question here is why is the demand for Bitcoin skyrocketing and more and more people buying Bitcoin ? Answering this question will tell how people feel about the status quo.