Bitcoin: Pros and Cons

My view on Bitcoin is somewhat ambivalent. As I blogged 4 years ago, it is a legitimate currency, as it is being used by many and is now being endorsed by financial institutions, even if reluctantly. It made sense as a hedge earlier when prices were much lower, as the fiat currencies are being systematically debased globally (central banks are creating their sovereign currencies with reckless abandon).

But are crypto-currencies sound money? I contend they are not, because while Bitcoin has an upper quantity limit of 21 million, that doesn't preclude others from creating alternative blockchain crypto-currencies (including the institutional favorite, Ethereum). Indeed, there are thousands of cryto-currencies in existence today already. In other words, while Bitcoin is limited to an eventual quantity of 21 million (a good thing for maintaining purchasing power), there is no shortage of competing crypto-currencies (which is a bad thing).

There are other real risks of possessing crypto-currencies (the biggest being forgetting your password, rendering permanent loss of access). Owners have been hacked, exchanges have been hacked, despite 256-bit encryption and peer-to-peer infrastructure), or the grid could go down.
In a mad world of fiat currencies where the financial elite can steal wealth from the masses via the printing press, Bitcoin is a viable hedge option. But is it the ultimate safe haven asset? No.