Bitcoin on Tuesday burst through $17,000 for the first time in almost three years, as speculative mania continues to boost the digital currency.
It last surpassed the $17,000 mark in December 2017. But then it cratered more than 80% for the next year.
After December 2019, bitcoin traveled a jagged path upward until this March. Since March 11, it has well more than tripled.
That’s more the path of a penny stock than a stable currency. The use of bitcoin in legitimate commerce remains minimal. With that kind of volatility, it’s no wonder. At this point, bitcoin seems more a speculative vehicle than anything else.
To be sure, payments company Square (SQ) - Get Report bought $50 million of bitcoin in October. But that’s a hedge within its corporate treasury, The Wall Street Journal reported. Square's customers can buy bitcoin through their accounts.
MicroStrategy (MSTR) - Get Report, a digital software provider, purchased $425 million of bitcoin this year, according to the Journal. The company’s chief executive, Michael Saylor, said the bitcoin represented protection against a falling dollar.
But given bitcoin’s volatility, that's an arguable proposition. The Bloomberg Dollar Spot index has declined 4% over the past year. So the greenback is worlds more stable than bitcoin.
Bitcoin’s blockchain technology, which allows instant, transparent settlement of transactions, is clearly transformative. In light of these advantages, some kind of digital currency seems likely. Facebook (FB) - Get Report has worked on one that it calls Libra, but that hasn’t gone very far.
A digitized version of the dollar, or a digital currency linked to the dollar, may be more likely. The Federal Reserve, Treasury and Congress are unlikely to be very keen on a currency completely outside their control.