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- Bitcoin is often criticized as being too volatile to be a currency
- Bitcoin is only 13 years old, and not many currencies were doing that well at the same age
- The history of U.S. currency shows that those in glass houses shouldn’t throw stones
Bitcoin is often judged negatively on the basis of its volatility, which is a rationale offered by critics as a reason it cannot, and should not, function as a currency. As true as this might be, there is at least one very important reason for this – it is only 13 years old. Looking back through time, not many monetary systems were faring particularly well at 13 years of age, least of all U.S. currency.
U.S. Currency History Paints Troublesome Picture
Before the U.S. dollar was invented, the 13 colonies that made up the U.S. in the 1700s had their own versions of currency, which brought its own problems when it came to managing inflation. This led to the colonies having to issue new currencies to cope, currencies that were not based on tangible assets and quickly became devalued.
A form of universal money was needed, and it arrived at the tail end of the American Revolution in 1775. The U.S. Continental was the precursor of the U.S. dollar, and it didn’t last long. Plagued by the same issues as the disparate colonial currencies, with the added pressure of the rapidly increasing cost of the war against the British, over 240 million continentals were put into circulation in just three years.
With no deflationary mechanism in place, the value of the U.S. Continental collapsed – in just five years it was worth less than 2.5% of its intended value. By the 1780s it was so worthless that it had stopped being used altogether. By the time Congress decided to buy back some of the continentals in order to reduce the circulating supply, they offered 1% of the original value.
Give Bitcoin Three Hundred Years, Then Judge
Bitcoin may be criticized as a store of value of a currency, but those who compare it to the stability of fiat currency are forgetting that today’s most widely used currencies have been in existence for hundreds of years, during which time they have stabilized massively. Compare this to Bitcoin, which is just 13 years old and, unlike fiat currencies, has a measured and inflexible approach to its circulating supply.
Bitcoin may be volatile but, as history shows, the currencies they are compared to weren’t doing too great by 13 years old either. Try criticizing a 13 year old boy for not having the maturity of an old man and see how far it gets you.