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On March 15th, a Yale professor gave an interview in which he says that Bitcoin is not a great store of value or currency. William Goetzmann, an expert on the history of finance and director of the International Center for Finance at the Yale School of Management, a person with a long history in finance, has quite a bit to say about what he thinks of cryptocurrencies, particularly Bitcoin (BTC) as an asset that stores value and medium of exchange.
Yale Insights, the Yale School of Management in-house publication, has recently interviewed William N. Goetzmann, and the discussion was mainly focused on the purpose and value of money. The most interesting part of the interview was when Goetzmann presented his thoughts on the advent of cryptocurrency as a part of the Q&A.
He was asked fascinating questions on cryptocurrencies and how these digital assets are reimaging the concept of money. In his equally fascinating answers, he gave quite a great, unbiased insights on cryptocurrencies as a store of value.
Talking about the price volatility of cryptocurrencies, Goetzmann said that it is crypto’s greatest asset or its worst enemy, and that’s what prevents it from being trusted as fiat currency and ideal vehicle of store of value. In contrast, he also stated that government-backed fiat currency also doesn’t solve everyone’s problems, which includes cross-border payments, cost-effective transaction, and removal of a costly intermediary.
When he was asked about his thoughts on the impact of cryptocurrency, Goetzmann spoke on its uncertainty. He says that cryptocurrencies may have a wider impact but it is not “fundamental to the economy.” Digital currencies like Bitcoin are highly volatile, speculative, prone to hacking attacks and many other drawbacks that do not make it an ideal competitor of fiat currency. He went further to explain that there is not a single place where you can look up your Bitcoin key in case it’s lost.
According to him, volatility, among the other characteristics of cryptocurrencies, is what makes it not suitable means of exchanging value, followed by the issue of liquidity. When he was asked whether improved liquidity of Bitcoin can make it really successful, Goetzmann answered:
“There are a few basic things any currency has to fulfill. It has to be a store value. It has to be a method of transferring value. With Bitcoin, because it fluctuates so much, it’s not a particularly good store of value. You could put in $100 worth today, and it could be worth $25 dollars two weeks from now. Until it overcomes that particular feature, it’s not a great currency.”
Talking further during the Q&A session, he explained that Bitcoin brings us back to the original way of doing business when the paper money was yet to be invented; during that time, merchants used to rely on the ledgers for trading, assigning values to their good and services instead of exchanging actual money.
He also talked about Bitcoin’s association with various fraudulent activities and buying illicit assets anonymously. His views on Bitcoin seem to be neutral if we go through the complete discussion but he believes, as many others do, that it’s currently a speculative digital asset investment at best.