Bitcoin, the Mother of all Bubbles or the Future of Money?

Crypto currencies have sparked great interest lately not only among regular people, billionaires and Wall Street, but it also caught the attention of national and global financial regulators across the world. In this article, we try to answer the following questions: what is bitcoin? It is money, a mean of payment, a huge bubble or just a way to evade taxes, launder money and fund illegal trade? We will answer these questions by testing whether bitcoin is a bubble with the help of right-tailed ADF tests and analyzing if the price of bitcoin has experienced shocks. We identify bitcoin price shock when the price of bitcoin is above its Hodrick-Prescott trend plus one standard deviation. Also, we will analyze if bitcoin fulfils the roles of money and if itself or a stablecoin like Libra can attain an important place within the international monetary system. We will also research the potential risks associated with the adoption of Libra, especially in poorer countries. Despite Bitcoin and Libra’s weaknesses, an advantage is that they insist on the necessity of faster and cheaper cross-border funds transfers 24/7, 365 days a year.