Is Bitcoin a Real Currency?
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Yermack examines Bitcoin’s historical trading behavior to determine whether or not it behaves like a traditional sovereign currency. He finds that Bitcoin’s exchange rate volatility is greater than the volatilities of widely used currencies, undermining Bitcoin’s usefulness as a unit of account or a store of value. Additionally, he finds that Bitcoin’s daily exchange rates exhibit virtually no correlation with bona fide currencies, which he argues makes Bitcoin useless for risk management purposes and difficult for its owners to hedge. Bitcoin also lacks access to a banking system with deposit insurance, and is not used to denominate consumer credit or loan contracts. Overall, he concludes that Bitcoin appears to behave more like a speculative investment than like a currency.