IF YOU THINK BITCOIN or any other cryptocurrency will one day be used as readily as dollars and cents, give some thought to this year’s volatility. Suppose you were using your bitcoin stash to pay your $2,000 monthly mortgage payment. Between April and today, the effective cost of your mortgage would have doubled—because bitcoin’s value has been pretty much cut in half.
Now, if you were paid in bitcoin and your mortgage payment was fixed at some value specified in bitcoin, this wouldn’t matter. The fluctuations in bitcoin’s value against the dollar would be the equivalent of turmoil in the foreign-exchange markets—which isn’t a problem unless you plan to travel abroad or buy imported goods.
But given that we’re paid in dollars and buy items denominated in dollars, the wild ride by cryptocurrencies is indeed a big problem for their future as a payment system. Something, however, tells me that most owners of cryptocurrencies give scant thought to spending the darn things, and instead their sole focus is turning a quick profit.