Whenever I write anything about Bitcoin, I receive a number of emails from, um, well-wishers calling me any number of colorful names, to put it politely. It seems people have really strong opinions about their cryptocurrencies. Anyone who isn’t completely onboard with them is a Luddite, or worse, as I found out in no uncertain terms.
I have a friend who knows my general opinion on Bitcoin, and he has been quick to tell me how much it went up in price in 2016. Surely, this must be the start of something wonderful for his two-coin investment, and I hope it is for his sake. However, I still can’t wrap my head around cryptocurrencies as generally accepted mediums of exchange. If for no other reason, there seems to be few barriers to entry, outside of the brilliance of a handful of people smart enough to write the necessary algorithms. What are their parameters? How do we keep them from adhering to them?
Further, will retailers and businesses really be equipped to accept umpteen different currencies, all trading at different levels on unregulated global exchanges? Perhaps firms like Amazon might, but the local mom and pop? Shoot, since businesses realize income and pay taxes in the local reporting currency, they would have to exchange the cryptocurrency almost immediately to avoid significant market fluctuations. What, with potentially a limitless number of currencies floating through the economy? Who wants that risk?
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Then there is the simple fact: As long as the IRS demands payment in U.S. dollars, the dollar will be the primary transactional currency in our country. Period. It doesn’t matter how awesome the technology is. When the folks who write the laws, and have the guns, say they want X in April, we will give them just that. As such, we might as well use our dollars if we have to have them anyhow.
Nope, I just can’t get there, at least not now.
With that said, cryptocurrencies can and will be a store of value moving forward, particularly in countries suffering economic and political distress. If I lived somewhere like Venezuela, Syria, Libya or Zimbabwe I would be buying Bitcoin like a madman, or figuring out a way to do so. I mean, I would be getting whatever wealth I had out of the local financial system as quickly and surreptitiously as I could.
So, I imagine this is what has been behind Bitcoin’s recent climb: global unrest, which seems to be in abundance. As such, cryptocurrencies do seem to be gaining some market acceptance as a store of value. Sure, a little gold and a few $100 bills in the safe, coupled with a couple of Bitcoins out in cyberspace? Why not? I wouldn’t argue tooth and nail with a client that wanted to do such a thing with a few bucks.
However, that doesn’t mean I want to buy a pack of gum at Walgreen’s with the stuff. After all, you wouldn’t pay for a soda at the convenience store with a silver dollar, would you? What a mess! Working out the spot price of silver with a disinterested clerk over a $1.50 purchase? Of course you wouldn’t, even if there are a few that say they would.
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These would be the same people who flooded my inbox with all kinds of unpleasantness the last time I broached the subject. I wonder if they will do so again. Probably.
John Norris is a managing director, and the head of wealth management, at Oakworth Capital Bank in Birmingham. He can be reached at [email protected]
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