The View | Why bitcoin and other cryptocurrencies of its kind are best relegated to a footnote in economic history

In a recent commentary for the Financial Times, economist Dambisa Moyo makes a case for why business leaders should invest in bitcoin. Her three main arguments are that bitcoin is a way to mitigate company risk, cryptocurrencies can provide possible solutions for doing business in emerging economies, and digital currencies augur an exciting new future of “currency platforms”.

First, it is unclear how buying bitcoin can mitigate company risk. The only risk Moyo identifies is that of missing out on what could be one of the greatest speculative bubbles of all time. True, a company that missed out on a continued bitcoin appreciation could face dire consequences – including acquisition by a bitcoin-invested rival. Obviously, investing in bitcoin is one sure way to avoid missing out on capital gains on bitcoin. But that hardly makes it a wise investment, especially when one weighs the potential returns against the high risk of material capital losses.

Equally far-fetched is the idea that cryptocurrencies could provide solutions to problems often encountered in emerging economies. It is true that, unlike conventional fiat money – which includes central bank digital currencies – decentralised private cryptocurrencies like bitcoin are not at risk of being “overissued” by profligate governments. It is also true that the risk of overissuance is greater in some emerging markets than in most advanced economies.

But overissuance of currency is just one possible threat to emerging market financial stability, and removing it does not suddenly make bitcoin a reliable store of value. Quite the contrary: bitcoin’s price volatility since its inception in 2009 has been staggering. On March 29, its price reached US$57,856 – some distance below its all-time high of US$61,284 on March 13 – with a market cap close to US$1 trillion.