Bitcoin: Currency or Mania?

Bitcoin has a low risk of collapse Unlike traditional currencies that rely on governments. When currencies fall, it contributes to hyperinflation or the wipeout of someone’s savings in a minute. Bitcoin exchange rate is not regulated by any government and is an electronic money available globally.

Bitcoin is easy to carry. A billion Bucks in the Bitcoin can be saved on a memory stick and placed in one’s pocket. It’s so easy to transfer Bitcoins compared to paper money.

The general idea is that Bitcoins ‘ are ‘mined’… intriguing expression here… by solving a hard mathematical formula -more difficult as more Bitcoins are ‘mined’ into existence; again intriguing- to a computer. Once created, the new Bitcoin is put into a digital ‘wallet’. It’s then feasible to exchange actual goods or Fiat money for Bitcoins… and vice versa. Furthermore, as there’s not any central issuer of Bitcoins, it is all highly dispersed, thus resistant to being ‘handled’ by authority.

Naturally proponents of Bitcoin, Those who benefit from the growth of Bitcoin, insist rather loudly that ‘for sure, Bitcoin is cash’… and not only that, but ‘it is the best money , the cash of their future’, etc.. . Well, the proponents of all Fiat shout just as loudly that paper money is cash… and we all know that Fiat newspaper isn’t cash by any means, as it lacks the most important attributes of real money. The question then is does Bitcoin even be eligible as cash… not mind that it being the money of the future, or the best money .

Compared to Fiat, Bitcoin does not Do too badly as a medium of exchange. Fiat is only accepted in the geographic domain of its issuer. Dollars are no good in Europe etc.. Bitcoin is accepted internationally. On the other hand, not many retailers currently accept payment in Bitcoin. Until the approval grows , Fiat wins… although in the cost of trade between countries.

The first condition is that a lot Tougher; cash has to be a stable store of value… today Bitcoins have gone out of a ‘value’ of $3.00 to about $1,000, in just a few decades. That is about as far from being a ‘stable store of value’; since you can buy! Truly, such gains are an ideal example of a speculative boom… such as Dutch tulip bulbs, or real mining companies, or Nortel stocks. Has what you have discovered added to your previous knowledge? bitcoin revolution is a massive area with many additional sub-topics you can read about. You can find there is much in common with topical areas closely resembling this one. You should be careful about making too many assumptions until the big picture is more clear. So what we suggest is to really try to find out what you need, and that will usually be determined by your circumstances. We will tie all together plus give you a hint of other necessary information.

Of course, Fiat fails here as well; For instance, the US Dollar, the ‘main’ Fiat, has lost over 95 percent of its worth in a couple of decades… neither fiat nor Bitcoin qualify in the most important measure of cash; the capacity to store value and preserve value through time. Real money, that is Gold, has shown the ability to hold value not only for centuries, except for eons. Neither Fiat nor Bitcoin has this crucial capacity… both fail as money.

Finally, we come to the next Feature; that of being the numeraire. Now this is really intriguing, and we can see why the two Bitcoin and Fiat fail as cash, by looking closely at the question of the ‘numeraire’. Numeraire refers to the use of money to not only save value, but to in a sense step, or compare worth. In Austrian economics, it is deemed impossible to really quantify value; after all, significance resides just in human comprehension… and how can anything in understanding actually be measured? But through the principle of Mengerian market action, that’s interaction between bid and offer, market prices can be established… if just momentarily… and this industry price is expressed in terms of the numeraire, the most marketable good, that’s money.

So how do we set the value of Fiat… ? Through the idea of ‘buying power’… which is, the value of Fiat depends upon what it can be exchanged for… a so called ‘basket of goods’. But his clearly suggests that Fiat has no value of its own, instead value flows from the worth of their goods and services it might be exchanged for. Causality flows from the goods ‘bought’ to the Fiat number. After all, what difference is there between a one Dollar bill and a trillion Dollar bill, except that the amount printed on it… and the purchasing power of this number?


Leave a Reply