Bitcoin isn’t a currency

As more and more sites are accepting bitcoin payments I’m struck by the fact that they don’t list BTC prices, but list USD prices and allow you to resolve your USD denominated transaction with the bitcoin payment system. This makes bitcoin as much of a “currency” as MasterCard, PayPal or a personal check.

8 replies on “Bitcoin isn’t a currency”

  1. Isn’t this simply a function of how widely accepted the currency is? At the moment there is relatively little you can buy with your Bitcoins, so it’s only natural to regard them mainly in relation to the dollar. But if Bitcoins become popular enough, Bitcoin users will gain a sense of their intrinsic value and won’t have to think of them in terms of the dollar. Isn’t this what has been happening to the Chinese yuan?

  2. But since your Bitcoin account is denominated in Bitcoin rather than USD, the amount that actually gets debited from your account is variable based on the BitcoinUSD exchange rate, no? So it *is* a currency — what you’re describing is basically like if I were shopping on a foreign website with, say, prices in Euro, but using my American credit card to make the purchase.

    1. That may be a fair comparison, but it seems like nobody is valuing goods in bitcoins. It seems to function purely as a store of value. Like an ugly, useless gold. Your American credit card is denominated in USD because most of your transactions are for goods whose value is expressed in USD.

      1. So from a day-to-day usage standpoint, it’s basically a foreign currency. Since my Paypal and credit card accounts are denominated in USD, I know that my balance will be the same in my primary currency from day to day — with Bitcoin, they could vary significantly as the exchange rate varies.

  3. Bitcoin is still too volatile to value and price goods at this point. I don’t think that will happen until the value of all the transactions that happen in bitcoin actually equal the “market cap” of bitcoin. So if people were actually doing 10 billion dollars worth of transactions, today, in Bitcoin, I think you would see more things actually priced in BTC.

    There’s value holding bitcoin; there is a 1.5% transaction fee to move in and out of BTC to USD. If a merchant could reasonably hold BTC, then buy other goods and services with it, why would they move it into dollars at all?

  4. By the way, I think that the total amount of transactions that will be transacted in BTC annually will eventually be in the tens of trillions, not billions. MasterCard does about 2 trillion of transactions annually.

    So there is a logical story for another 100-fold increase in the value of BTC from here.

  5. Existing definitions do not fit.
    Currency? (bitcoin is better; not inflatable)
    Precious metal without the metal? (bitcoin is better: not confiscatable; cheaper to store)
    An entry in a ledger? (better: Auditable by everyone, always)

    Struggle with definitions is not fruitful.

    Consider instead what bitcoin can do for you:

Comments are closed.