Bitcoin, whose ballooning market cap reached above $325 billion a month ago, is not a worthy opponent for fiat money, says Minneapolis Federal Reserve President Neel Kashkari. In fact, no single cryptocurrency could give the US dollar a run for its money, so to speak. Instead, they are more likely to tussle with one another as they jockey for position among the top 10 digital coins.
Altcoins, or those cryptocurrencies that are not bitcoin, may not catch bitcoin’s size anytime soon, but nearly 50 of them boast a market cap of USD 1 billion-plus, up from fewer than a dozen only months ago.
Kashkari during a public appearance in his home state is quoted as having said:
“I don’t see bitcoin as a credible competitor to the dollar in the United States of America, and the reason is the barrier of entry to you creating your own coin and me creating my own virtual currency … is zero.”
It’s not the first time Minneapolis Fed’s Kashkari has weighed in on cryptocurrencies, with the official in recent days pointing to blockchain technology as possessing a higher potential for use in society over any digital currencies, similarly taking issue with the number of new coins that are being released.
Meanwhile, bitcoin has been more relatable in design to precious metals, particularly gold, than fiat currency. Similar to gold, bitcoin is said to be a store of value, and that is the very speculation that is said to be driving the price higher. Investors hoarding gold have similarly been drawn to the decentralized nature of bitcoin. Meanwhile, bitcoin’s rise may be at the expense of the gold price, which suffered some hiccups in 2017.
To be fair, the value of the world’s mined gold dwarfs bitcoin at approximately USD 7.5 trillion, but gold and bitcoin may be more acceptable opponents than bitcoin and the dollar. Gold might not produce the roller coaster experience that bitcoin investors were on in 2017, but it’s not an emerging asset like cryptocurrencies.
While use cases for bitcoin are on the rise, the cryptocurrency is frequently held, not spent. This feature resembles gold more than it does the dollar. Meanwhile, the very blockchain startups that support bitcoin, such as alternative lenders, encourage cryptocurrency owners to hold their bitcoin, use it as collateral and take loans in fiat money.
Getting back to the Fed’s Kashkari, he doesn’t deny the potential global influence of bitcoin and leading altcoins, but that hope for tomorrow is clouded by the uncertainty that surrounds this market segment today. He says despite the fact that while there’s a cap of 21 million on the number of bitcoin that will be mined, altcoins are coming out at a fast and furious rate. “[If] it gets muddled with all these other alt coins you can still have inflation, because you don’t know which ones to trust. I just think this has a long way of going before we know how this shakes out,” said Kashkari cited in CNBC.
It may be early innings for bitcoin, but there appears to be room for both the cryptocurrency and the US dollar to coexist.
Featured image from Flickr.