I strongly disagree with Nouriel Roubini’s comments about bitcoin and would like to highlight why the currency is a legitimate alternative to conventional money (“Bitcoin is hardly a hedge against tail risk”, Opinion, February 11).

Bitcoin is indeed volatile. But this is to be expected in such a young and relatively small instrument. It was only invented in 2009. Bitcoin is like a growth stock. As it grows and becomes seasoned it will be less volatile. Like many growth stocks, it may even become blue-chip.

A volatile market does not mean a manipulated one. This is arguably what the world’s major currencies now are. (“Switzerland and Vietnam classed as currency manipulators by US”, Report, December 17).

The common practice of central banks buying or selling large amounts of their currency on the foreign exchanges to influence the natural market rate is also manipulation. Bitcoin is virtually free of central bank involvement, another key attraction.

Of course, in a young instrument there are practical inefficiencies, but again these can be expected to be worked out over time. While currently few places accept bitcoin that number will increase, as will the speed and efficiency of transactions and of exchange. Even now, however, it is cheaper to change bitcoin for dollars than dollars for euros or sterling, which typically costs a usurious 3-7 per cent for retail transactions, against pennies for bitcoin.

Commentators have been too preoccupied by the bubble-like levels of the blockchain currencies. This is a cyclical phenomenon. Once the bubble has popped, I believe several blockchain currencies will survive and have a long-term future.

David Crook
Chief Executive, Tail Wind Advisory & Management,
London WC2, UK

Source