Bitcoin Still Has to Prove It Can Be Working Currency: NYU Professor
A respected finance professor from NYU says Bitcoin still has to prove that it can be a working currency.
Bitcoin, whose value has skyrocketed in recent times, needs to prove useful, and because it is designed to be a currency, its usability as one needs to obvious and accessible. These are the thoughts of NYU finance professor Aswath Damodaran who worries that cryptocurrencies cannot be called a success - yet.
"If you don't believe that Bitcoin will ever acquire wide acceptance in transactions, it is time that you were honest with yourself and recognized that is just a lucrative, but dangerous, pricing game with no good ending," Aswath Damodaran, a professor of corporate finance and valuation at New York University's Stern School of Business wrote in a blog post.
The professor argues that digital currencies like Bitcoin and Ethereum, who are leading the pack in this new and unchartered market have indeed succeeded when it comes to their value in attracting investors, as well as making a name in the mainstream. However, as a currency, there is nothing to be congratulatory about as acceptance and adoption of Bitcoin is lagging.
Source: Aswath Damodaran
A justifiable currency
The high Bitcoin price and its seemingly unstoppable growth can be justified, according to Damodaran, if it can become widely accepted as a form of payment. Because of its finite amount; only 21 mln coins can exist, and the high demand for limited supply makes sense.
However, its usability is limited, and even going backwards. Of the top 500 online retailers, only three currently accept Bitcoin, and that figure is down from five last year.
Transaction fees and slow confirmations of payments have stunted the acceptance. However, there is light at the end of the tunnel. The scaling debate on Bitcoin was recently solved with the prediction being that the issues dogging the currency around speed and cost will be alleviated.
A new and younger gold
Despite its shortcoming as a currency, Damodaran says that Bitcoin is appealing to younger investors in a similar way that gold used to to the previous generation. The lack of trust in financial institutions, as well as fiat currencies, makes Bitcoin an extremely attractive investment and store of wealth.