Bitcoin and cryptocurrencies are expected to be subject to further price falls as mainstream adoption proves elusive and governments begin to crackdown. The price levels [ ]. Jun 30, · Why Currencies Have Value. Currency is usable if it is a store of value, or, put differently, if it can reliably be counted on to maintain its relative value over time and without feuerwehr-matzenbach.de Bitcoin isn't money it's a currency. Currencies have all the same attributes as money except "store of value". Bitcoin isn't worth anything if other fiat currencies start collapsing, it becomes worthless.
Bitcoin is worthless as a currencyBitcoin Is An Asset, Not A Currency
So if Bitcoin struggles to stay stable enough to be a currency, and its lack of regulation makes it a turn off for big investment, what about as a commodity? Commodities, as a reminder, are a basic good that is interchangeable with other goods of the same type. Essentially, a commodity produced by one producer is basically the same as that produced by another producer. Examples of commodities in the real world are:. In recent years, more financial products have been added to the commodity list, one of which is Bitcoin.
But what does that mean in practice? Commodities traditionally have higher price volatility than assets like property, or money supplies like currency, making them a fertile environment for speculators trying to predict the rise and fall of an asset and betting accordingly.
This is where you find futures trading, a marketplace where people are trying to predict which way a commodity will swing. Bitcoin as a commodity seems to work on two different investment horizons. Short term, daily volatility, and longer-term speculation. Long-term, Bitcoin's Stock to Flow model highlights that the cryptocurrency is likely to continue to grow steadily over the longterm.
Thanks to the Chicago Board Options Exchange, there is a benchmark for regulation that has weeded out non-compliant exchanges. The most recent example being BitMEX, which was charged with being an unregistered trading platform. As we've argued previously, Bitcoin is more akin to commodities like wine.
The reason: not only because of its investment potential, but also because wines and whiskeys are different things to different people. Wine can be something that is grown, drunk, invested, or speculated upon, depending on who you ask. Bitcoin, we argue has a similar profile. It's different things to different people. The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment, or other advice.
This sponsored article was created by Decrypt Studio. Learn More about partnering with Decrypt Studio. A Millibit is 0. This ensures that even on a global scale people could transact in fractions of bitcoin , if the value is to increase it is likely that casual daily spending will be in bits and milli bits. An example of this would be heading to your local cafe and purchase a coffee for milli bits.
A bitcoin can be stored on your phone, tablet, computer, or even a bitcoin-specific hardware wallet. It weighs nothing and is frictionless to move around. This is much lighter than lugging around a hunk of gold, or carrying a wallet of cash. It has never before been possible to move significant amounts of value across the world within seconds for almost no cost. This could strengthen relationships in the global economy and make it easier to build global businesses.
The table below represents how bitcoin and cryptocurrencies, in general, compare to gold and sovereign currency as money. This is a problem that could be solved in the future if the network adapts additional privacy features.
It is understood that money in lay terms refers to government issued sovereign currency, however throughout history civilizations have used many different mediums of money.
Some of which are rocks, squirrels , jewels, wine and seashells. Every civilization throughout history has had their form of money. Before sovereign currency, gold was the medium of trade for many nations, and to this day still is a very good store of value. As with any new currency, it will take time for adoption to grow.
Whether bitcoin has been adopted as a currency or if it is going to be is a topic for another time. Bitcoin is only valuable if it truly becomes a critical world currency. Right now, speculators are the only people driving up the price. A speculative cult currency like bitcoin is only valuable when you cash it out to a real currency, like the US dollar, and use it to buy something useful like a nice house or a business.
When the supply of foolish speculators dries up the value evaporates — often very quickly. A currency should also not be artificially sparse. It needs to expand with the supply of goods and services in the world, otherwise we end up with deflation and hoarding. It helps to have the Federal Reserve system and other central banks guiding the system. Full anonymity and government evasion will not be one of its features.
The cryptocurrency bubble is really a repetition of the past. This is a known bug in our operating system, and we have designed some parts of our society to protect us against it. These days, stocks in the US are regulated by the Securities and Exchange Commission, precisely, because in the olden days, there were many stocks issued that were much like bitcoin, marketed to unsophisticated investors as a get-rich-quick scheme. A version of this post originally appeared on the blog mrmoneymustache.
So you're thinking about investing in bitcoin? An investment is something that has intrinsic value, not speculative value. Mr Money Mustache.