Source: Flickr / btckeychain.

Not all of bitcoin’s proponents are radical libertarians — venture capitalist Chris Dixon, for example, is both a cryptocurrency supporter and a self-described lifelong Democrat — but many of them are.

Last year, Overstock.com ( NASDAQ: OSTK ) made news when it became the first major retailer to accept bitcoin. The announcement was hardly coincidental: The company’s CEO, Patrick Byrne, is a noted libertarian who describes money as too important to leave in the hands of the government.

To those who share Byrne’s philosophy, the appeal of bitcoin comes from its resistance to inflation: Unlike U.S. dollars, whose supply is dictated by the Federal Reserve, the number of bitcoins is controlled mathematically. A hard cap is intrinsic to bitcoin’s design, and though new bitcoins will continue to be mined into existence in the coming years, the total number of bitcoins will never exceed 21 million.

Slaying Leviathan

Jeffrey Tucker, the CEO of Liberty.me, is one of those proponents. Characterizing bitcoin as the magic bullet that will slay Leviathan , he believes cryptocurrency is an unstoppable force, a technology that will end the age of big government.

Tucker was once the editorial vice president of the Ludwig von Mises Institute, an economic think tank advocating the work of Ludwig von Mises, a somewhat obscure economist who supported unrestrained free markets. Mises was deeply opposed to central banking and advocated for a gold standard. To Tucker, and many bitcoin supporters, bitcoin is the gold standard of the digital age. Unable to be replicated, and not easily controlled by governments or central banks, bitcoin holds the promise of truly unregulated commerce.

But Mark Spitznagel disagrees. The founder and CIO of Universa Investments (a hedge fund with around $6 billion in assets), Spitznagel is such a passionate believer in Mises’ theories that they form the basis of his investing strategy. In his recent book, The Dao of Capital. Spitznagel argues that investors can beat the market by successfully applying strategies derived from Mises’ work.

Applying Mises’ theories, Spitznagel is expecting a major market correction — he believes the S&P 500 ( SNPINDEX: ^GSPC ) could fall by as much as 40% in the coming months, as poor economic fundamentals finally catch up to the overvalued stock market.

In the meantime, Spitznagel thinks investors should sit in U.S. Treasuries — not bitcoin. Despite his own libertarian leanings, Spitznagel is deeply skeptical of Bitcoin, characterizing it as castle in the clouds. Because bitcoin lacks intrinsic value of its own, Spitznagel told me, it’s not wholly different from any existing fiat currency. It may help to facilitate digital commerce, but as it stands, it’s simply an extension of the dollar.

Just an extension of the U.S. dollar

Indeed, while Overstock.com may accept bitcoin, it doesn’t store them — all the bitcoins Overstock.com takes in (now worth more than $1 million per day) are converted directly to U.S. dollars. The free publicity generated by bitcoin was unquestionably a smart move for Overstock, but Byrne is clearly intelligent enough not to saddle his company with extreme currency risk (and that’s putting it mildly).

The rising value of bitcoin has attracted a great deal of attention from investors — Goldman Sachs released a report on bitcoin earlier this month, trashing it as a currency but suggesting its underlying technology could have some value. Warren Buffett wasn’t as kind, telling investors to stay away, and arguing that its current valuation was a joke.

But with the cryptocurrency still trading near $600, bitcoin bulls remain undeterred. Treasury officials are clueless about bitcoin, Tucker told me. For someone whose ideology centers around distrusting the government, such an asset has obvious appeal. Still, there’s no consensus, even among Fed critics: Spitznagel argues that all forms of money must have underlying commodity-value.

While there are people like Dixon out there, much of bitcoin’s recent bid appears to be ideologically motivated. While the underlying technology could have some promise, I suspect those buying bitcoin out of opposition to the government are setting themselves up for failure.

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