Steve Forbes, chairman and editor-in-chief of Forbes Media, has written that until cryptocurrency ties itself to gold, a basket of commodities, or a bundle of major currencies, it will never replace money.
In a piece written for Forbes online news, he suggests that the creators of cryptocurrencies have overlooked the fact that digital currencies basically are susceptible to one main flaw, which is also a factor of physical currency; value fluctuation.
Steve Forbes says, that as most buyers are trying to make a “quick buck”, they forget that one of the reasons cryptocurrencies were originally created was to negate the instability of government-produced money and its fluctuating fortunes. He cites an example that, “If in 2013 you had taken out a mortgage for USD 250,000 in Bitcoin, you’d owe the bank roughly USD 18 million today.”
Forbes goes on to say that he feels that digital currencies can’t replace money, however flawed the current central bank currencies may be, as they need to be a “real alternative”. To become this, cryptocurrencies need to be used for day-to-day transactions, without an artificially restricted supply.
According to Forbes, an artificial supply won’t create real value, but utility and trustworthiness do. He cites the Swiss franc, which has a bountiful supply, creating long-term stability and faring better than most currencies over the past 100 years.
Forbes maintains that Bitcoin’s fluctuating fortunes is an example of the destructiveness of monetary unreliability, and suggests there is a distinct parallel to the dollar’s instability following the abandoning of the gold standard in the US in the early 1970s.
Alternatively, there are some that have a completely different view regarding digital currencies, such as Bitcoin, commenting that rather than Bitcoin being tied to gold it should actually replace it. John Pfeffer of UK-based Pfeffer Capital made these comments at the Sohn investment conference in New York recently:
“Bitcoin is the first viable candidate to replace gold the world has ever seen. So if Bitcoin becomes the dominant non-sovereign store of value, it could be the new gold or new reserve currency.”
Pfeffer did not overlook the potential problems of cryptocurrencies, however. He advised that Bitcoin was by far the strongest investment asset, while other currencies still carried “substantial risks”.
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