Does money have to be a government monopoly?

Buyers of Bitcoin are screaming a collective “no,” as the price of the crypto-currency continues to hit record highs.

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A $10,000 investment in Bitcoin in July 2010 is worth over $162 million today.

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By comparison, over the same time period, a similar investment in Commodities (DBC) is worth $6,655, Gold (GLD) is worth $10,189, Bonds (AGG) is worth $12,194 and the S&P 500 (SPY) is worth $25,647.

The price of 1 Bitcoin ($1,462) is now higher than 1 ounce of Gold ($1,257).

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Moving back to the initial question: does money have to be a government monopoly? The free market is clearly saying no. Money has evolved over the years and it will continue to evolve. Bitcoin and other cryptocurrencies are simply the latest iteration. Will they survive in their current form? I don’t know, but a competitor to paper money with is inexorable. The demand for something different is there – and where there is demand – there is innovation.

Should Bitcoin continue to rise in price and popularity, I have no doubt that governments around the world will attempt to shut it down. The justifications for doing so are easy to conjure (criminal use, tax evasion, etc.). As we have seen in education, health care, and anything else the government controls, they seem to have little appetite or tolerance for competition.

But evolution is not something you can turn on and off. It may take longer, but technology and digital currencies will continue to move forward, regardless of government efforts to stop them. So long as the U.S. Dollar remains relatively stable, there is little in the way of real competition from cryptocurrencies. But with government debt and the supply of dollars continuing to rise unabated, it is only a matter of time before an increasing number of people seek an alternative.

This is not so much a prediction as an economic reality. If your currency is being debased, you will find an alternative or stand to lose everything. Venezuela is perhaps the best example today. With the highest inflation rate in the world (estimated at 525% last year), the number of Venezuelans using Bitcoin has gone from 450 in August 2014 to over 85,000 in November 2016. In Nigeria, a country facing similar issues, we are seeing a similar trend.

I don’t pretend to know what the future for money looks like. I just know it will look different than today. Whether that future includes Bitcoin will ultimately be decided by the market, as it should be, and not some centrally-planned government.