Why Bitcoin is in an awkward situation

In recent times, the development of bitcoin seems to have entered a "vague period": on the one hand, national regulators remain wary and apathetic about Bitcoin. A recent report by the Bank of England said bitcoin would pose a serious threat to the stability of the UK financial system on the day that the digital currency was fully accepted by the market, and Bitcoin appeared to be slowly developing in many countries depending on the channel. According to reports, a Melbourne company issued the first Australian Bitcoin debit card, the San Francisco Bitcoin base company is prepared to develop Bitcoin wallet in Europe.

It is argued that the "cold treatment" of Bitcoin by national regulators is due to the perceived threat of bitcoin to its status. But in fact, although bitcoin has the embryonic characteristics of some new currency, it is still far from being a true non-central bank credit currency. Fundamentally, the national authorities are most concerned that the blind worship of Bitcoin may cause financial risk accumulation and bubble burst, and then have a serious negative impact on financial stability.

Despite the "cold treatment" of governments, Bitcoin still has the space for development, for two reasons. One is after the world's largest bitcoin trader "Mentougou" (Mt.Gox) the impact of the collapse of national regulatory policy tightening, the rest of the bitcoin "players" for their loyal fans, not to support their monetary rationality, but the difficult to fade the "rich" mentality. Most people currently hold the ultimate goal of Bitcoin, or convert it into a national legal currency, rather than buy or consume goods. Second, some monetary rationalism feel embarrassed that bitcoin's "go Central bank" characteristics in the real world is a "double-edged sword", because of the lack of regulation and restraint, bitcoin more with countries such as gambling, drug trafficking, pornography and other gray economy linked together.

According to the traditional definition, the function of currency includes the measure of value, the means of circulation, the means of storage and payment. In contrast, the current Bitcoin in addition to the value of storage features, the other three levels of responsibility. According to the Palgrave Economics Dictionary, money is defined as any object that can normally be accepted and used as a medium of exchange. With the popularity of Bitcoin myth and price fluctuations, its applicability as a medium of exchange has been extremely weakened.

Internet Information technology will undoubtedly have an astonishing impact on the monetary system, but in the foreseeable future, the sovereign State and government structure supporting the survival of the modern legal currency remain firm. Fundamentally, the existing legal tender money is a credit currency, is the state or government credit as the last guarantee, through the expansion of credit channels distribution and circulation. Bitcoin is also a credit currency, but in the absence of national credit security, can only rely on people's confidence, and thus have "emotional" characteristics, the value is very unstable. In addition, the lack of credit expansion channels for Bitcoin to "lubricate" the economy, although it seems to help solve the problem of currency flooding in modern countries, but in fact it is difficult to carry increasingly complex economic activities.

Bitcoin development so far, its monetary attributes are gradually disappearing, and more and more like a variety of financial innovation "supermarket" in some "price instability" products, but too eye-catching hype, has been virtually destroyed the future of Bitcoin. Only by further returning to rationality and strengthening its own monetary attributes, Bitcoin will not become the "martyrs" of currency reform under the new technological conditions.

(Responsible editor: Lvguang)