Bitcoin’s value is likely to remain volatile, which will limit the digital currency’s usefulness, according to a select group of economics professors across the US.
The IGM Economic Experts Panel — 38 academics from Harvard, Yale, Stanford, Princeton, the University of Chicago, the University of California-Berkeley and the Massachusetts Institute of Technology — tackles a different public policy issue in a weekly email poll. In this latest poll, they were asked the following question about bitcoin:
“A bitcoin’s value derives solely from the belief that others will want to use it for trade, which implies that its purchasing power is likely to fluctuate over time to a degree that will limit its usefulness.”
A full 61 percent of the panelists said they agreed with the statement, while 18 percent responded that they “strongly agreed”. Only 5 percent disagreed. The rest were uncertain or expressed no opinion.
“It is already trading like a speculative asset and (there is) no reason why that will cease,” replied Anil Kashyap, professor of economics and finance at the University of Chicago’s Booth School of Business.
In an interview with CoinDesk, Kashyap noted that most successful forms of money have some baseline value because of government sponsorship or some other intrinsic value:
“Federal Reserve notes can be used to pay taxes, which is useful and the government tries to responsibly control the supply,” he said. “Gold has other uses besides serving as money.”
Kashyap — who ranked the confidence of his response as a “7” on the poll’s scale of 1 to 10 — added, “Bitcoins exist in a vacuum; they only have value because you assume when you get one, you can pass it along to someone else and the supply is uncertain. So their value is more like a painting than traditional money: if they fall out of favor there is nothing that stops them from losing a high fraction of their value.”
In the poll itself, fellow Chicago professor Austan Goolsbee was even more confident (ranking his “strongly agree” response as a “10”) and succinct. His response? “Hahahaha. ROTFL.”