Do Cryptocurrencies Such as Bitcoin Have a Future?

Despite the mystery, the whiff of scandal, and general public unfamiliarity with the concept, somebody out there is buying, and selling, not just bitcoin but dozens of other cryptocurrencies as well. The total market capitalization for these unregulated electronic forms of payment was roughly $4.04 billion as of mid-February, according to coinmarketcap.com, a website that tracks trading in alternative currencies. More than 500 altcoins, as they are also known, were represented on the site recently.
Growing global demand for low-cost, swift transactions – by cutting out banks – is one of the main forces driving interest in alternative currencies in recent years. Another, of course, is pure speculation.
Perhaps the most common criticism of cryptocurrencies is that, unlike traditional currencies, they have no basic underlying value. Supporters will counter that, like a lot of investments, a cryptocurrency is worth whatever the market says it is.
But that’s an argument that can cut both ways, especially in bitcoin’s case: Since reaching roughly $1,147 in December 2013, the value of a bitcoin, the leading cryptocurrency by market cap, has plunged about 80%.
Time will tell which alternative currencies, if any, will grow in acceptance and value.
Are we at the start of an era in which new monetary systems will be adopted?
Or should we keep our hands on our wallets?
Are we at the start of an era in which new monetary systems will be adopted?
Or should we keep our hands on our wallets?
Arguing that there is indeed a future for cryptocurrencies, or at least the technologies that some of them are based on, is Campbell R. Harvey, a professor of finance at Duke University in Durham, N. C. Taking the other side, that the lack of guarantees and controls cannot be overlooked, is Eric Tymoigne, an assistant professor of economics at Lewis & Clark College in Portland, Ore.

This post was published at Wall Street Journal on March 1, 2015.