Milken Institute senior advisor Michael Piwowar argues that Bitcoin’s extreme price volatility prevents it from functioning as a reliable currency, despite the emergence of dollar-pegged stablecoins as alternatives.

Key Points

• Michael Piwowar identifies Bitcoin’s rapid price fluctuations as a primary barrier to its use for everyday global payments and transactions.
• Stablecoins attempt to solve volatility by maintaining a 1:1 peg to the U.S. dollar, often backed by liquid assets like Treasury securities.
• The U.S. dollar has experienced significant instability since the 1971 decision to end the gold exchange standard, leading to massive daily currency trading markets.
• Crypto exchanges currently offer interest-bearing rewards on stablecoin deposits, effectively operating as banks while often bypassing traditional financial regulatory requirements.
• The author contends that because the dollar itself lacks inherent stability, stablecoins and Treasury-backed assets cannot provide a truly constant measure of value.

Why it Matters

The debate over currency stability highlights significant risks for investors using crypto exchanges that function as unregulated banks. If the underlying assets backing stablecoins are not as stable as assumed, these platforms may face systemic vulnerabilities that impact consumer deposits and market confidence.