- Bitcoin is not a currency, but a speculative asset, veteran economist Steve Hank said on Tuesday.
- The Johns Hopkins University professor noted that cryptocurrencies like Bitcoin must be tied to commodities to qualify as a legitimate currency.
- Nevertheless, the respected scholar tends to ignore a straightforward thing: Bitcoin is not a foreign currency note operating under the control of a central bank or a government.
Veteran economist Steve Hank is not a bitcoin fan.
The Johns Hopkins University professor on Tuesday bashed the cryptocurrency for lacking the qualities of a traditional currency. He said in a tweet that he sees Bitcoin as a speculative asset, adding that it can become a currency only if it gets tied to a basket of commodities.
#Bitcoin is a highly speculative asset, not a currency. #Cryptocurrencies must be tied to a basket of commodities in order to be considered a legitimate currency. https://t.co/D920f9vazx
— Prof. Steve Hanke (@steve_hanke) June 22, 2020
In retrospect, many national currencies derive their values from their benchmark commodities. For instance, Australia is the world’s largest iron-ore producer and exporter. It means that the demand for the product plays a significant role in driving the Australian dollar’s value upward/downward.
Similarly, Canadian Dollar largely tracks the value of oil, a commodity that amounts to almost 11 percent of Canada’s exports.
An Incomparable Asset
But these definitions of national currencies do not cater for Bitcoin. A massive distributed group of miners pool their computational resources to run a decentralized ledge that validates and maintains a record of transactions. In return, a pre-programmed algorithm gives them a digital reward called bitcoin.
As bitcoin tokens come into existence, they present their holders with a multitude of use-cases. For instance, they can send bitcoin to anywhere in the world without needing to go through a bank or other third-party services by giving 99 percent lesser fee.
In other cases, users can simply hold their bitcoin tokens in anticipation of selling them later at a higher rate. More adoption ensues a bullish scenario for the cryptocurrency, similar to how the prices of gold and stocks rise.
In its 11-year lifetime, media has called Bitcoin a new form of money, speculative asset, commodity, a Ponzi scheme, a bubble, and whatnot. But the adoption is increasing,