I am afraid that down the road, Bitcoin will make libertarians look bad.  There are varying opinions about Bitcoin and cryptocurrencies even within the libertarian movement, but if and when Bitcoin fails, the enemies of liberty will be quoting the large segment who are currently promoting Bitcoin.

I am not so much talking about the investment or speculation side of Bitcoin.  If a libertarian, or anyone else, says that you should get into Bitcoin because it is going to $100,000 and you can make some quick money, that is one thing.  It is quite another to promote Bitcoin as an alternative form of money that will transform the world.

For hardcore libertarians who understand that there should be a complete free market with regard to money, the position is consistent that people should be free to use or not use Bitcoin or any other cryptocurrency or alternative currency as they want.

Many libertarians are sympathetic to Bitcoin just for the fact that it is a potential competing currency, and it calls attention to the harmful policies of the central bank.

In this sense, I don’t want to make enemies of the people who are hardcore Bitcoin supporters, as it is difficult enough in this world to find people who have some understanding of the Federal Reserve and actually oppose it.  However, I also don’t want to give a reason for all of the anti liberty people to be critical of the liberty movement when Bitcoin doesn’t fulfill its promises.

It’s Not Money

I recently listened to an episode of the Tom Woods Show.  He had on a guest talking about Bitcoin.  The guest kept insisting that Bitcoin is money.

This is completely untrue.  In the United States, U.S. dollars serve as a form of money and really nothing else.  Gold has a long history of being used as money and would probably be used if left to the free market, but gold really doesn’t serve as money now either.

To be money, it has to be widely accepted.  You can’t walk into Walmart and pay with Bitcoin.  You can’t buy airline tickets with Bitcoin.  You probably aren’t going to pay your car mechanic in Bitcoin.  Even if some of these places started to accept Bitcoin, they would be almost-instantly converting bitcoins received back into dollars.

There is also the continuing problem that you are supposed to pay capital gains taxes on any dollar gains made by trading Bitcoin.  This would make bookkeeping quite complicated for individuals and businesses trying to stay compliant with the law.

The guest on this episode of Tom Woods’ show wasn’t saying that Bitcoin had the potential to be money.  He wasn’t saying that Bitcoin was on its way to becoming money.  He was saying that it is money, which is wrong.

Tom Woods is a solid libertarian and very knowledgeable on many issues.  And while I don’t think my position differs in any way in terms of policy (let the free market decide), I didn’t agree with one of his points in this episode.

Tom said that most of the people out there criticizing Bitcoin are the same people who want to keep you under lockdown for the virus.  This is a faulty debating technique.  It also isn’t even true.

Sure, there are many pro lockdowners who criticize Bitcoin in the corporate media.  This is no surprise.  But there are also a lot of people who fully opposed the lockdowns who also are not proponents of Bitcoin.  Also, the people in the corporate media criticizing Bitcoin are often criticizing it for different reasons than some libertarians criticize it.  I have also seen several establishment-type figures promoting Bitcoin for investment purposes.

Peter Schiff is one such prominent person in the liberty movement who speaks against Bitcoin, but there are many others in the libertarian/ Austrian school camp who are not hyping up Bitcoin and are warning about it.

I think some libertarians are excited about Bitcoin now because it was a group of somewhat liberty-minded people who brought it about, and now it has become something.  It has made the ticker on CNBC, so it is in the big leagues of personal finance now.  And this all came about because of a bunch of techie nerds who were sympathetic to free market money.

The problem is that Bitcoin and the thousands of other cryptocurrencies are nothing.  They were invented on a computer screen.  They have taken off now as part of the everything bubble.  I have no doubt that there was a good chunk of people who took their free government money (stimulus checks) and bought Bitcoin or other cyrptocurrencies.  The Bitcoin bubble fits right in with the stock bubble.

The only thing that libertarians should be saying in terms of policy is that people should be free to choose whatever form of money they decide.  It should be left to the marketplace.

This doesn’t preclude anyone from predicting or speculating that Bitcoin will go higher in terms of dollars.  But that should be done outside of the realm of libertarianism.

It’s like a libertarian saying, “As a libertarian, I understand that price inflation will reach 10% by next year.”  This is incorrect.  You can say, “As a libertarian, I understand that the Fed’s monetary inflation will do harm to the economy by misallocating resources and potentially leading to higher prices.”

It would not be incorrect to say, “As a libertarian, I predict that price inflation will hit 10% next year.”  But in this case, identifying as a libertarian is unnecessary in order to predict price inflation, and if you get the prediction wrong, it doesn’t mean you are wrong about libertarianism.

If Bitcoin crashes in terms of U.S. dollars, I think libertarians are going to take a beating in terms of reputation.  I know that the powers-that-be will go after libertarians no matter what.  But in this case, they will have actual quotes and video footage of libertarians touting Bitcoin and how it will one day compete with (or replace) dollars.

If Bitcoin goes to zero, the libertarian position remains the same.  The marketplace should choose money.  Ultimately, there should be no central bank.

I am thankful that Peter Schiff has been a consistent critic of Bitcoin and cryptocurrencies in general.  Again, he’s not saying that anyone should be forbidden from trading it or holding it.  But he understands that Bitcoin lacks all of the good characteristics as a form of money.  That honor still belongs to gold.