One of the things that makes Bitcoin's value so volatile - if consistently rising in price - is its very limited supply.  $200 million has been spent on equipment to mine BTC, whereas all BTC in existence (and even that which has been lost) has a value of $4.3 billion at current exchange rates.  (These exchange rates are not very deep, subject to some level of manipulation by holders of BTC, and also do not reflect lost bitcoins.)

This very tight money supply does give bitcoin an edge in retaining value.  However, it is a serious impediment to adoption as a money supply.  In order to be currency, a coin needs to be in high circulation.  It needs to have acceptance and be in usage.  While the bitcoin money supply is as tight as it is, this is very difficult for bitcoin to accomplish.

The Federal Reserve of WIP has a moderately loose target for the ease of the WIP money supply over time.  A moderate level of inflation will spur investment and usage of WIP.  For example, for inflationary reasons, I would greatly prefer to keep my WIP with the CBIP (the first accredited bank in the Federal Reserve of WIP trading system, and independent of the Federal Reserve of WIP), at a moderate interest rate, than to keep it directly on the ledger without any interest rate and lose value directly to inflation.

Secondly, by having a central policy that enables lending of WIP at reasonable interest rates - a central goal of the Federal Reserve of WIP - it can be one of the only coins actually available to borrowers who have some productive usage of them.

In both of the above senses, bitcoin currently fails.  While it is undoubtedly a currency in which the BTC remittance network is denominated, as a practical currency it has a difficult fight for adoption.

This difference will be easier and easier to see as our policies unfold.

We welcome any of your thoughts in the meantime.

Best regards:

Chairman of the Federal Reserve of WIP