Market Commentary

Cryptocurrency

The popularity of an electronic currency such as Bitcoin could doom itself simply because of its success. Governments, including the U.S., manage their currencies. They will print more money when they think the economy needs it, and they will restrict it to control inflation and slow down an overheated economy. They use money as a lever.

If a cryptocurrency becomes ubiquitous in the system and it in fact becomes a popular medium of exchange that competes with the government-controlled currency, do you think that the government will not restrict it or even outright ban its use? There will be legislation controlling cryptocurrencies. As yet we have no idea what that might be but recently the SEC has labeled it an asset and rules are under consideration on how to monitor its trading as an asset.

For now, these currencies have virtually no restrictions of any kind. That will not stand and if they become too popular that might be a sign of their own doom as a currency.