The Impossibility of Bitcoin as a CurrencyGeorgia HuangAdvanced Positioning EconomicsDr. BruceMarch 23, 2014A decentralized digital cryptocurrency, Bitcoin is touted by proponents as a way to avoid detection and taxes. However, bitcoins are not a viable long-term currency due to security issues, extreme instability, legal issues, and trade regulations. Can Bitcoin be considered a currency? In a macroeconomic context, there are five main economic objectives. The first is price stability, or the goal of preventing deflation and ensuring a low and stable inflation rate. Bitcoin is so subject to severe price volatility that it is impossible to stabilize it as a currency. Ranging from $5 to $1200, bitcoin prices fluctuate based on a fluctuating exchange rate. Eric Posner, a professor at the University of Chicago Law School, reports that bitcoin is more than seven times more volatile than gold and more than eight times more volatile than the S&P 500. There is no maximum or minimum price. Furthermore, bitcoin prices are easily influenced by speculation and the media; the popular tech site Slashdot published an article about bitcoin that caused the price to increase sevenfold in just a few days in 2010. Another post in Time in April doubled the price in less than seven days. A Bitcoin bubble is created as press coverage of the price surge attracts more users and drives the price up further. This represents a serious obstacle to the adoption of bitcoin as a medium of exchange; few would do a business where a product that costs $5 today becomes $15 tomorrow. Unlike modern currency, Bitcoin does not have a central bank or government institution to monitor the currency or maintain price stability. While decentralization avoids interference… paper cent scams and reports of illegal activity, US authorities have also begun to strengthen their authority over digital currencies; Manhattan U.S. attorney Preet Bharara recently condemned the leaders of Liberty Reserve, an online money laundering firm that collaborated with Silk Road. Russia, China, India and Indonesia have all imposed rather strict regulations, with China restricting bitcoins so that they cannot be exchanged for yuan. With this announcement, prices dropped to a third of the original price, from 7,588 yuan to 2,560 yuan, causing a chain reaction in other countries. Japan-based exchanges fell from $717 to $480 per bitcoin, further highlighting the volatile nature of the digital currency. With growing protectionism, Bitcoin is losing its liquidity, which does not make it an attractive option for investors and traders. Opinion: what is the future of bitcoin?