At the end of the article the guy says: “What really defines the price is its reputation and expectations for the future.”
But isn't that true of any currency? Isn't that why a green piece of paper with Benjamin Franklin's face on it is worth anything at all, just because we believe in the US government's stability?
"We" is doing a lot of work in that last sentence. It's rather like saying "English is only useful because so many people speak it".
The US dollar is, like the existence of the US itself, supported by the collective belief of its citizens and quite a lot of people outside its borders. That belief carries quite a lot of weight because it's difficult to dislodge.
The reputation of bitcoin is shorter and less clear, and expectations vary.
Perhaps a better comparison than US currency would be with currency with a nation that had only recently formed, and that many people doubt that it will be around in 20 years. The volatility of their currency may attract people into making short-term purchases, but long-term investors will be harder to find.
One thing which government-issued fiat currencies have going for them which cryptographically secured fiat currencies do not is taxes. Someone who lives in Windsor and commutes to Detroit every day will have to pay taxes in US dollars for the work performed in the US and then pay taxes in Canadian dollars because that person lives in Canada. They need to have some amount of US dollars and some amount of Canadian dollars even if they can do all of their shopping, rent, utility bills, etc. in Bitcoin.
Since taxes are done in the local government-issued fiat currency, local businesses need to hold some amount of that currency anyways. It is simpler and cheaper for local businesses to do all of their business in that currency not to mention it sidesteps the issue of dealing with currency risk.
Perhaps, but the USD has a relatively strong history of stability. Not a word I'd ever associate with Bitcoin (or really any cryptocurrency) at any point since its launch.
It's an interesting question. I would argue that it isn't about the U.S. government's stability, but more about the confidence that you can use a dollar to buy x. And I don't think its a binary decision like the dollar will ultimately not be able to purchase x. Instead it will be how many dollars it takes to buy x and if the number of dollars increases rapidly, you get a sudden erosion of confidence.
But isn't that true of any currency? Isn't that why a green piece of paper with Benjamin Franklin's face on it is worth anything at all, just because we believe in the US government's stability?