There is a hot debate on whether bitcoin is a bubble or the currency of the future. Retailers and manufacturers are starting to accept digital cash as a legit form of payment. Originally designed as a peer to peer exchange, bitcoin has become increasingly popular because of the minimal transaction costs involved. At the same time, some economists are unconvinced that bitcoin is a reliable source of value. The main problem to this end is price volatility. It is also more difficult to monitor and keep track of financial transactions as it is a self-regulating currency. Another problem is inelasticity – demand exceeds supply which leads to high volatility and price speculation. It is more volatile than paper currencies and commodities such as silver and gold. On the positive side, bitcoin has become widely accepted because of the ease of use, portability, and convenience. One thing is for sure, digital currencies are to stay and may play an important role in the future.
Bitcoin is a popular virtual currency and part of a trend toward currency digitalization and decentralization. For some economists, the underlying technology is promising and has a future but they are more skeptical about the currency itself. For many investors, price volatility signals that bitcoin is not a stable currency which makes it a risky investment. Price volatility is a problem as central banks cannot step in to print more money to meet demand. High price volatility is mainly due to the inelastic money supply. Some experts believe that bitcoin has a future if there is some central authority to control money supply. In any case, bitcoin is a radically new system and currency and an innovative way to invest, trade, and exchange value. Digital currencies are a work in progress like many other inventions of their time.
