Bitcoin "is too volatileto be used as money", experts in Davos warn
Bitcoin has attracted fierce criticism and praise from business figures and world leaders in Davos this week.
The cryptocurrency has continued to divide opinion at this year’s World Economic Forum, with experts disagreeing on its staying power and whether or not it’s worth using at all.
“I’m impressed with the technology, but it seems to me that it’s technology for something else,” said Nobel Prize-winning economist Robert J. Shiller during a panel debate.
“I tend to think of bitcoin as an interesting experiment, not a permanent feature of our lives. We’re over-emphasising bitcoin, we should broaden it out to blockchain, which will have other applications.”
Some of bitcoin’s biggest critics have conceded that they see genuine promise in blockchain, the decentralising technology behind the cryptocurrency. Mark Zuckerberg believes it can be used to improve Facebook.
Bitcoin, however, is yet to convince everyone thanks largely to its lack of stability. It hit a record high when it passed $19,850 in mid-December, but then tumbled rapidly, falling to below $12,000 within days.
Its value has shifted unpredictably ever since, with frequent wild drops and recoveries.
“What bothers me about bitcoin is that the enthusiasm you see is like a speculative bubble. It’s selfish,” Professor Shiller added.
Cecilia Skingsley, the deputy governor of the Swedish Central Bank, was also highly sceptical about bitcoin during the panel session.
“It’s too volatile to be used as money,” she said, adding that digital currencies “don’t store value, they fluctuate, and they’re not at a stable rate of exchange”.
That’s the precise reason payment processing company Stripe gave for its decision to end support for payments made in bitcoin.
It has now “evolved to become better-suited to being an asset than being a means of exchange”, the firm said.
However, others at the World Economic forum saw reasons for optimism.
“I think this is one of the most audacious, generous and profound inventions that I’ve witnessed in my career,” said Neil Rimer, general partner and co-founder of Index Ventures SA, during the panel.
“We’re nine years into this experiment. It’s gone well at times and quite poorly. It could fail completely and go to zero, but it has accomplished a number of things I think are remarkable.”
Rimer, though, conceded that bitcoin is still mainly popular amongst “hobbyists”, and that it might be too volatile to ever become truly mainstream.
However, regulation could change that, he added.
“I do think [bitcoin] needs to be regulated, just like anything I would want to become mainstream should be regulated,” he said.
Earlier this week, the South Korean government announced that, from 30 January, everyone trading digital currencies in the country will have do so using their real names.
Shortly after, Theresa May said she will look at bitcoin and other digital currencies “very seriously”, as she’s concerned about their popularity amongst criminals.