Kevin O’Leary Says Bitcoin Won’t Work As A Currency

Bitcoin evangelists think of the cryptocurrency as just that: a currency. They see it as the future of money, a way to send cash from person to person without government interference. In theory, Bitcoin’s decentralized, secure blockchain makes it an ideal platform for international commerce.

So Kevin O’Leary, the Shark Tank panelist who loves money, decided to test it out. But he ran into a snag. He told CNBC that snag showed him why he’ll be forever reluctant to endorse the idea of Bitcoin as a currency.

O’Leary revealed that he recently had to settle a transaction with a European player for USD $200,000. O’Leary suggested using Bitcoin, since, in theory, all he’d have to do was buy the digital currency and send it electronically across the Atlantic. No hassle with exchanges or getting clearance from banks.

“The whole idea of Bitcoin as a currency is you don’t have to do any of that. You just buy $200,000 of Bitcoin and then send it to them.”

But those on the other side of the deal weren’t so willing. They agreed to do the transaction only if O’Leary insured it for the USD price of $200,000.

They had good reason to be concerned. In December, Bitcoin has fluctuated as much as 20 percent in a day or two, according to CNBC, although it still sits at about 20 times its value of one year ago.

Of course, volatility is nothing new, even for conventional currencies. In October of 2011, Marc Auboin and Michele Ruta published a World Trade Organization working paper on the effect of fluctuating exchange rates on international trade. Rapidly changing rates are a serious detriment to trade, as neither side is guaranteed the price for which they bargained.

Bitcoin’s challenges are not restricted to international transactions. The same day that O’Leary made his comments to CNBC, Mashable reported that gaming provider Steam has stopped accepting Bitcoin payments because of its rapidly changing value.

However, there is an argument in favor of Bitcoin when it comes to comparisons to traditional, but unstable, fiat currencies. In an era of political unrest, digital currencies such as Bitcoin might prove an unexpected safe haven for everyday people unable to hold onto wealth. CNN reported last month that Bitcoin was trading in Zimbabwe at a rate twice that of global exchanges. In other words, Zimbabweans wanted in. Zimbabwe’s currency was abandoned in 2009 because of devaluation and on-the-ground trade takes place using currencies from other countries.

Market Watch reported in August, 2017, that one of the benefits of Bitcoin, in theory, is its transportability without interference from a state or devaluation as a result of political unrest. But in practice, a currency such as Bitcoin, which is not backed by a central bank, is only worth what individual users believe it to be. That means Bitcoin’s value is quite unpredictable.

As for its value as an investment, O’Leary also told CNBC that potential buyers should view the transaction a lot like gambling, to be used as entertainment, just as one would a trip to Las Vegas.

Meanwhile, according to USA Today, on Sunday CBOE Futures Exchange (CFE) launched the first Bitcoin futures, allowing investors to trade on the cryptocurrency without buying in directly.

Shark Tank airs Sunday nights on ABC.