Bitcoin Bites?

We’ve discussed Bitcoin here a few times --- how it serves the function of money but doesn’t behave like money. I have always been suspicious of it. I think there is a major collapse coming.  Sure, the price could soar much higher. There is a technological limit of 21 million bitcoins, and there are over 17 million already. Further, each new one takes more resources to create. It is unlikely that the 21 million limit will be hit because of the huge computing power (and electricity consumption for cooling and computation) that would be needed for those last few coins.

One threat to bitcoin is quantum computing technology. The day may come when the whole system can be hacked in minutes. Another problem is that the bitcoin supply cannot expand with the economy, so as money it can only be deflationary. You can’t have an economy thriving in deflation because borrowers will be hard to find. Who wants to borrow money that is relentlessly climbing in value? It has to be repaid. And who wants to spend that money? And if there are no borrowers or spenders, there is no bond market and no consumption market. Hard to picture a modern economy without a bond market or without people buying consumables. So bitcoin has limited uses. And maybe eventually no uses once government seeks to intrude into the process.