On the most recent edition of the PRIMO NUTMEG podcast, the Director of the Cato Institute's Center for Monetary and Financial Alternatives, George Selgin, gave a quick and concise run-through on the history of money and banking.
"The Bitcoin story is a lot more than a currency story. As a currency, as an alternative potential currency, Bitcoin is fascinating, but not terribly important. The number of actual currency or exchange transactions proper that Bitcoin is used for is small -- certainly compared to its overall now very impressive capitalization.
"But I think it's becoming increasingly obvious to people that the significance of Bitcoin, and of its underlying blockchain technology, is much more far-reaching than any potential medium of exchange applications. It's got a million other applications, some of which I think are much more important."
At the same time, Selgin was hesitant to predict the future value of Bitcoin, which recently hit an all-time-high of over $4,500:
"Now, what all of this has to do with what each Bitcoin is worth, that's a very difficult question. Of course there's an element of speculation involved -- a very large one. Of course the value could come down again, and perhaps dramatically. Lots of things can happen.
"But I think when people are investing in Bitcoin they are expressing, first of all, their enthusiasm for the technology and its potential applications. And, ultimately, their belief that one way or another, for whatever purposes we might envision, the demand for Bitcoin is not going away anytime soon. And that doesn't have to be because it's widely used as a medium of exchange. There are all kinds of reasons why Bitcoin can be valued because there are all kinds of potential uses it can have. So the Bitcoin story is a very, very big story."
As Bitcoin has continued skyrocketing in value, the libertarian community has remained divided on the topic. On the one hand, Ron Paul has been bearish about Bitcoin compared to gold and silver. On the other, John McAfee has stated that, if Bitcoin does not hit $500,000 in 3 years, he will eat his genitals:
For his part, Selgin did actually compare Bitcoin to precious metals:
"In a way, Bitcoin is similar [to gold and silver]. Of course, it's not valued as ornament. It's not valued for its looks. It is valued, though, for its scarcity and its valued for being a unique technology that the full usefulness of which is becoming more evident day after day. And so it's value is just as legitimate as that of any other asset or representative of a new technology. So, in that sense, if people are bullish on Bitcoin, to some extent at least, it simply means that they believe this technology is here to stay and that its applications will only grow over time.
"That's not saying that the value of Bitcoin right now might not be higher than it will be next week; it's just saying that there is something to it, after all. It's not sheer speculation, whatever that might be."