Finance experts and economists have argued over the past year that bitcoin’s price swings and immense fluctuations have hurt its own chances of becoming a viable, dependable currency. This is something that economist Milton Friedman was concerned about during the 1970s when the topic of competing currencies (PDF) initiated.
Federal Reserve economist and vice president of the St. Louis Fed David Andolfatto told Bloomberg News that the virtual currency’s regular ebb and flow makes it less useful when compared to more stable currencies, such as the United States Dollar, though the greenback has dramatically declined in value since the central bank’s inception. This can be found on the U.S. Inflation Calculator.
“You don’t want that in a monetary instrument,” said the Fed official. “A good money should maintain a stable purchasing power over short periods of time.” He added that the central bank has provided citizens with a stable currency for a century and has “passed the market test.”
Instead, according to Andolfatto, bitcoin and other cryptocurrencies could serve a purpose as an electronic payment processor, one that could replace conventional forms of payments. It could save merchants and consumers a lot of money – Goldman Sachs recently projected as much as $200 billion globally.
Other central banking officials have recently come out against bitcoin. Esther George, president of the Kansas City Fed, said the U.S. will be studying and understanding the digital currency and added that it won’t be widely adopted until something stabilizes its value.
Even the staunchest bitcoin proponents have given up their fight as a genuine alternative currency to the dollar. Therefore, a number of bitcoiners and others have conceded to serving as an innovative and revolutionary electronic payments system in the future.
