Is Bitcoin a Real Currency? An economic appraisal / David Yermack.

By:

Yermack, David

Contributor(s):

National Bureau of Economic Research

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w19747.Publication details: Cambridge, Mass. National Bureau of Economic Research 2013.Description: 1 online resource: illustrations (black and white)Subject(s):

E42 - Monetary Systems • Standards • Regimes • Government and the Monetary System • Payment Systems
G23 - Non-bank Financial Institutions • Financial Instruments • Institutional Investors

Online resources:

Available additional physical forms:

Hardcopy version available to institutional subscribers

Abstract: A bona fide currency functions as a medium of exchange, a store of value, and a unit of account, but bitcoin largely fails to satisfy these criteria. Bitcoin has achieved only scant consumer transaction volume, with an average well below one daily transaction for the few merchants who accept it. Its volatility is greatly higher than the volatilities of widely used currencies, imposing large short-term risk upon users. Bitcoin's daily exchange rates exhibit virtually zero correlation with widely used currencies and with gold, making bitcoin useless for risk management and exceedingly difficult for its owners to hedge. Bitcoin prices of consumer goods require many decimal places with leading zeros, which is disconcerting to retail market participants. Bitcoin faces daily hacking and theft risks, lacks access to a banking system with deposit insurance, and it is not used to denominate consumer credit or loan contracts. Bitcoin appears to behave more like a speculative investment than a currency.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w19747 (Browse shelf(Opens below))	Not For Loan

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December 2013.

A bona fide currency functions as a medium of exchange, a store of value, and a unit of account, but bitcoin largely fails to satisfy these criteria. Bitcoin has achieved only scant consumer transaction volume, with an average well below one daily transaction for the few merchants who accept it. Its volatility is greatly higher than the volatilities of widely used currencies, imposing large short-term risk upon users. Bitcoin's daily exchange rates exhibit virtually zero correlation with widely used currencies and with gold, making bitcoin useless for risk management and exceedingly difficult for its owners to hedge. Bitcoin prices of consumer goods require many decimal places with leading zeros, which is disconcerting to retail market participants. Bitcoin faces daily hacking and theft risks, lacks access to a banking system with deposit insurance, and it is not used to denominate consumer credit or loan contracts. Bitcoin appears to behave more like a speculative investment than a currency.