Why Bitcoin is Not a Currency: Analyzing Its True Value

The Rise and Fall of Bitcoin

Ah, 2017. The year when Bitcoin seemed to follow the trajectories of roller coasters rather than currencies. At one moment, it was a majestic $7,700, and by the end of the day, it could dip to a mere $5,600. If only the Bitcoin ride came with seatbelts!

Bitcoin: A Different Kind of Animal

So, what’s the deal? Many still clutch onto the notion that Bitcoin is a currency. But let’s put on our economist hats and take a deeper look. Bitcoin may strut around looking like money, but let’s face it, it lacks the main characteristics that make good ol’ fiat currencies like the USD or the Euro actually work for everyday Joe consumers.

Understanding Currency Fundamentals

Every currency should tick off three main criteria:

• Medium of Exchange: It should be accepted for transactions.
• Unit of Account: It should serve as a measure for economic transactions.
• Store of Value: It should hold its purchasing power over time.

Bitcoin’s Shortcomings

Is It a Medium of Exchange?

Alright, let’s give Bitcoin a pat on the back for gaining traction with some businesses. However, let’s not ignore the glaring issue of volatility. Pricing a latte in Bitcoin could leave baristas feeling dizzy. Picture this: You list your charming vintage couch for 1 BTC, but by lunchtime, it’s suddenly worth 1.5 BTC. Who’s bringing snacks to that confusion party?

Does It Work As a Unit of Account?

Not quite. In fact, no one is issuing loans in Bitcoin, nor can you find a loan shark or bank that operates in BTC. While you can convert it, the reality is most transactions are translated back to good ol’ fiat at the end of the day!

Can It Serve as a Store of Value?

This is the one area where Bitcoin shines, albeit with a twist. Essentially, it has metamorphosed from a currency into a speculative asset owned by those hoping to ride the next wave of price hikes. The speculation makes Bitcoin look like an investment, not cash you can buy groceries with. Even some consumers in crisis-ridden regions, like Zimbabwe, have taken a liking to the cryptocurrency, but due to dire circumstances, not out of convenience.

The Bottom Line: Will Bitcoin Ever Be Currency?

After weighing the pros and cons, it’s safe to declare that Bitcoin isn’t entering the elite circle of currencies anytime soon. High transaction fees, inefficiencies in energy use, and community disputes imply its path remains questionable. However, Bitcoin might just establish itself as a solid alternative asset class. Who knows? Maybe one day, we’ll chat about Bitcoin as the poster child of digital investments!