A few days ago the St. Louis Federal Reserve entered the debate regarding crypto and specifically, the price of Bitcoin. In brief, the Fed is not very impressed.
“Whither Bitcoin” asserts that the future price path is more likely to remain bounded between these two extremes. The extremes being zero and infinite appreciation. So not much help there.
Authored by David Andolfatto, Senior VP and Economist Andrew Spewak, Senior Research Associate, the brief document states that the fundamental value of Bitcoin is as a database management system. Database management systems can be replicated quite easily. In this case, the replicants are the legions of Altcoins that can effectively imitate the characteristics and qualities of Bitcoin.
In summary:
“… economic theory predicts that the price dynamic of an unbacked asset is likely to be highly volatile and inherently unforecastable. While Bitcoin’s price is not likely to fall to zero, the prospect of a flood of Altcoin competing with Bitcoin in the wealth portfolios of investors is likely to place significant downward pressure on the purchasing power of all cryptocurrencies, including Bitcoin.”
So does Bitcoin whither?
Perhaps, but there is no discussion of the characteristics of decentralization and little reference to the scarcity of the digital asset. Bitcoin is frequently measured in terms of other crypto but most observers measure the crypto in relationship to Hamiltons, Lincolns and, yes Benjamin Franklins.
Does it go to zero? Even the Fed thinks not.