Here are four answers to the question Megan McArdle raised in her April 20 Tuesday Opinion essay, “After eight years, the question remains: What’s the point of bitcoin?”
(1) It provides a strong hedge against inflation, because its supply is finite, unlike the dollar and other fiat currencies; (2) it is more efficient in performing key functions of money than our cumbersome, labor-intensive banking system; (3) it costs much less to hold and protect than gold and other precious metals; and (4) it is decentralized and rule-based, insulated from volatile political influences.
The pandemic and exploding national debt worldwide have made inflation all but inevitable. The near-collapse of our banking system in 2008 created a wide lane for an alternative, less-costly system of exchange. The total capitalization of bitcoin is about a 12th that of gold, the age-old hedge against inflation. Taken together with bitcoin’s much lower holding costs, it is grossly underpriced relative to gold. It might not be too far-fetched to imagine a time when we ask, “What’s the point of the dollar?”
Author: Brian Forst, Reston
