Why Isn't Bitcoin Booming?

"Bitcoin was seen by many of its libertarian-leaning fans as a kind of doomsday insurance," argues a columnist in the New York Times, "a form of 'digital gold' that would be a source of stability as the world grew more chaotic and unpredictable....

But it hasn't boomed. In the past month, the price of Bitcoin has fallen by 10 percent, and the price of ether has fallen by 15 percent. After Russia invaded Ukraine, the volume of digital currency trading increased, but it has remained relatively flat since. Russian oligarchs don't appear to be using the digital currency to evade sanctions, despite initial fears that they might.

It is argued in the column that the crisis is not being played out in a central role. Internet access is spotty in many parts of Ukraine, and reports have suggested that even the country's elites are struggling to convert their assets intocryptocurrencies. It is popular among skeptics of Cryptocurrencies that they are too volatile to be used as a hedge against economic and political instability. His group promotes a spinoff of the digital currency, which they see as a more useful version of the coin. A lot of supporters of the currency have had to come up with an argument that it is meant to be a reserve asset. Kevin Werbach is a professor of legal studies and business ethics at the Wharton School at the University of Pennsylvania. He said that libertarians were the earliest and most vocal users of the digital currency because they saw it as an insurance policy against corruption and hyperinflation. The recent price swings of cryptocurrencies attracted a surge of speculators who viewed them as investments and cared less about their political implications.

Eswar Prasad, a professor at Cornell's Dyson School of Applied Economics and Management, is a senior fellow at the Brookings Institution and author of The Future of Money: How the Digital Revolution is Transforming Currencies and Finance.

What is the professor's opinion? The Russian government can't count on the use of bitcoin to evade sanctions because payments for international transactions still need to be settled. Since the values of major reserve currencies are determined in formal financial markets, cryptocurrencies cannot prevent a country from collapsing in value. If Russians see Cryptocurrencies as a better option than the domestic currency, it will hurt Russia. It is possible that a flight of deposits from Russia's banking system will be caused by the emergence of the digital currency, as a conduit for capital flight out of the country.