Bitcoin, as analyzed by David Yermack, does not function as a traditional currency but rather as a speculative investment. Despite its rapid appreciation in 2013, Bitcoin exhibits extreme volatility, making it unsuitable as a unit of account or a store of value. Its exchange rate with the U.S. Dollar shows virtually no correlation with other major currencies, rendering it ineffective for risk management and difficult to hedge. Bitcoin lacks access to banking systems, deposit insurance, and is not used in consumer credit or loans. It also lacks financial derivatives such as forward contracts and swaps, which are standard for traditional currencies. Bitcoin was introduced in 2008 as a decentralized, algorithmic currency with a fixed supply of 21 million units. It gained traction among online enthusiasts and later started trading on exchanges like Mt. Gox. Its value surged in 2013, reaching over $1,200 per Bitcoin. However, its volatility is significantly higher than that of traditional currencies, with annualized volatility of 133% compared to 8-12% for other currencies. This high volatility undermines its role as a stable store of value and unit of account. Bitcoin's separation from traditional currencies and gold suggests it is not influenced by macroeconomic factors, making it a poor tool for risk management. Its lack of integration into the global financial system, absence of deposit insurance, and limited use in consumer finance further hinder its acceptance as a currency. Additionally, its fixed supply could lead to deflationary pressures if it becomes widely adopted, potentially causing economic disruptions. Overall, Bitcoin behaves more like a speculative investment than a currency, with significant risks and limitations that prevent it from fulfilling the traditional functions of money.Bitcoin, as analyzed by David Yermack, does not function as a traditional currency but rather as a speculative investment. Despite its rapid appreciation in 2013, Bitcoin exhibits extreme volatility, making it unsuitable as a unit of account or a store of value. Its exchange rate with the U.S. Dollar shows virtually no correlation with other major currencies, rendering it ineffective for risk management and difficult to hedge. Bitcoin lacks access to banking systems, deposit insurance, and is not used in consumer credit or loans. It also lacks financial derivatives such as forward contracts and swaps, which are standard for traditional currencies. Bitcoin was introduced in 2008 as a decentralized, algorithmic currency with a fixed supply of 21 million units. It gained traction among online enthusiasts and later started trading on exchanges like Mt. Gox. Its value surged in 2013, reaching over $1,200 per Bitcoin. However, its volatility is significantly higher than that of traditional currencies, with annualized volatility of 133% compared to 8-12% for other currencies. This high volatility undermines its role as a stable store of value and unit of account. Bitcoin's separation from traditional currencies and gold suggests it is not influenced by macroeconomic factors, making it a poor tool for risk management. Its lack of integration into the global financial system, absence of deposit insurance, and limited use in consumer finance further hinder its acceptance as a currency. Additionally, its fixed supply could lead to deflationary pressures if it becomes widely adopted, potentially causing economic disruptions. Overall, Bitcoin behaves more like a speculative investment than a currency, with significant risks and limitations that prevent it from fulfilling the traditional functions of money.