Bitcoin and Stablecoins Lack True Stability, Analysts Warn

100 US dollar banknotes symbols of the global economy spread out on a table in Clermont-Ferrand France on June 12 2025. (Photo by Romain Costaseca / Hans Lucas via AFP) (Photo by ROMAIN COSTASECA/Hans Lucas/AFP via Getty Images)

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Bitcoin and other cryptocurrencies were initially promoted as a remedy for the long-standing volatility of fiat currencies. This premise remains significant for several reasons, including a recent interview with Milken Institute senior advisor Michael Piwowar on the nature of money.

Piwowar noted, “The problem with Bitcoin is price volatility. Bitcoin’s price can swing dramatically—sometimes within minutes. That volatility may attract traders and investors, but it makes Bitcoin poorly suited for everyday payments. If you’re trying to send money across the world, you don’t want the value to change materially between the moment you send it and the moment it’s received.”

While the observation holds, it is often overlooked within mainstream economic discourse. Money is not a tool for buying, selling, borrowing, or lending; it is a neutral medium that facilitates the exchange of goods and services over time. Bitcoin’s lack of price stability undermines its ability to serve this function effectively.

Piwowar also mischaracterized stablecoins, suggesting they emerged as a solution to Bitcoin’s volatility. He argued that stablecoins simply anchor their value to the U.S. dollar, backed by liquid assets such as Treasuries. However, this oversimplifies the relationship between the dollar and its underlying asset base.

The assertion that the dollar’s value is a fixed benchmark against Bitcoin’s fluctuating valuation is misleading. While the U.S. dollar enjoys widespread acceptance, its stability is neither absolute nor guaranteed. Moreover, the fact that Treasury yields influence stablecoin valuations does not inherently confer stability to those digital assets.

Historically, the dollar’s perceived stability was partly due to its gold‑backed status before 1971, which helped establish fixed currency parities and limited currency trading markets. Revising the dollar’s gold link under President Nixon removed a key indicator of durability and introduced more volatility into the currency’s value.

Consequently, stablecoins—while designed to replicate dollar stability—do not achieve the theoretical or practical constancy required for reliable financial transactions. Piwowar’s implication that they are stable in practice is unfounded.

Understanding the limitations of stablecoins is critical beyond merely addressing price volatility. Crypto exchanges that store stablecoins and offer “reward” programs effectively present themselves as banking institutions while sidestepping conventional regulatory oversight. Their justification hinges on the perceived stability of the dollar and, by extension, Treasury-funded returns. However, if the dollar itself lacks true stability, then the returns associated with these deposits are equally uncertain.

Ultimately, the existence of a robust cryptocurrency ecosystem illustrates the challenges inherent in establishing a consistently stable digital monetary system. The debate surrounding Bitcoin and stablecoins underscores the need for careful scrutiny of their economic roles and regulatory implications.

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