The world’s first cryptocurrency, Bitcoin, scaled a fresh peak on Monday. It reached $72,234 per token, crossing its pandemic peak of nearly $69,000. Bitcoin may be ‘here to stay,’ but that still does not justify its adoption as a currency.
First, the argument that Bitcoin’s popularity signifies its legitimacy overlooks a crucial distinction between collectibles and currencies. Humans have always assigned value to various eclectic goods, from flip books to soda bottle caps, but these items serve as memorabilia, not mediums of exchange. The fact that people trade them for huge sums of money demonstrates a penchant for acquiring perceived assets, not a validation of their utility as currencies.
Further, the advocacy of crypto tokens as currency disregards its anti-sovereign stance and the risks it poses to fiscal and monetary systems. It has already failed its test as digital money, given its poor performance as a medium of exchange and store of value. It has proven too volatile for that; speculative swings have resulted in significant losses for investors.
In May 2021, for example, cryptos lost nearly $1 trillion in estimated market value. Instability undermines the utility of cryptos in facilitating everyday transactions and preserving wealth over time. Any currency or asset class must address these fundamental challenges and demonstrate structural robustness to fulfil its intended purpose effectively.
Read more on livemint.com