Bitcoin looks more like gold than a currency

Mumbai :In the seven months since Bitcoin’s price peaked, it has fallen by about two-thirds. But it’s still almost three times more valuable than it was a year ago:
So what does the future hold for the world’s first and still most famous cryptocurrency? I see three basic scenarios:
No. 1. Bitcoin Triumph: Bitcoin replaces the dollar (and probably other fiat currencies as well) as the economy’s main unit of exchange. People buy pizzas, finance their mortgages and pay their rent in Bitcoin.
No. 2. Bitcoin as Gold: Fiat currency remains the main unit of exchange everywhere except in a few extremely dysfunctional economies like Venezuela’s. But Bitcoin’s market capitalization remains substantial, and it rises in value over time, occasionally experiencing large bubbles and crashes.
No. 3. Bitcoin Bust: Bitcoin is abandoned, crashing relative to the dollar and never being useful as a payment method for daily necessities.
One can observe which of these scenarios the world is moving toward by keeping track of two prices: the exchange rate of Bitcoin against the dollar (pictured above), and the dollar inflation rate, which measures the exchange rate of the dollar against a basket of goods and services. If Bitcoin’s price plunges and approaches zero, it’s a clear sign the third scenario is underway. If the dollar crashes against both Bitcoin and real goods and services — that is, if Bitcoin and inflation both go to the moon — it indicates that Bitcoin Triumph is happening. And if Bitcoin rises against the dollar but inflation stays low, it means the middle scenario, Bitcoin as Gold, is in effect.
I have long believed in the middle scenario. Since the total number of Bitcoins that can be created is finite, the currency is inherently deflationary, meaning it has a positive expected return, like gold. Finance theory implies that an asset with a high expected rate of return should also be volatile, which makes it not very useful as money. No one wants to see the value of their paycheck get cut in half between payday and grocery day. But it also seems unlikely that interest in Bitcoin will ever die out, especially given its usefulness in the black-market economy. So my prediction is that Bitcoin will stick around, experiencing repeated bubbles and busts, but slowly gaining in value. That is why I personally still own some Bitcoin.
So far, the Bitcoin as Gold scenario has been borne out by the data. As pictured above, Bitcoin has risen in price even after taking the recent bubble into account. But inflation has been low and steady, showing that people are not abandoning fiat currency either:
So far, this looks very much like gold, which has risen in value despite experiencing a bubble and bust in the early 2010s:
But Bitcoin is only superficially similar to gold. There are powerful arguments for the Bitcoin Bust scenario, in which the cryptocurrency is abandoned. One such argument is made by University of Chicago Booth School of Business economist Eric Budish in a new working paper entitled “The Economic Limits of Bitcoin and the Blockchain.”