Is Bitcoin Worth To Be Currency?

[Ketekantrasi]

Discuss about bitcoin and cryptocurrency. For me, this is an interesting topic because bitcoin issues are often the talk, including confusion in many quarters. What is cryptocurrency? What is bitcoin? How does the regulator respond to the development of the current crypto currency? And how is the bitcoin phenomenon going forward?

In its purest form, cryptocurrency or crypto currency is a kind of electronic cash that can be sent directly from person to person (peer-to-peer) without going through financial institutions, or banks. Generally if we are currently sending funds or money to other parties, of course, must be processed through the bank. In this case, the bank serves as an intermediary. Well in this crypto technology, the payment is made directly without an intermediary. Transactions conducted between two parties in a network are then verified through a specific encoding process or cryptography. Well, Bitcoin is one of the existing cryptocurrency types, and is popular. In addition to Bitcoin there are more than a few crypto currencies similar to various names, such as ethereum, litecoin, etc. Many of these crypto currencies are short of devotees until they die one by one. In Bitcoin, if there are transactions of two persons, the other party in the network that can decode or verify the occurrence of the transaction, will be rewarded with bitcoin. This step is known as mining bitcoin (mining).

From what I've learned before, that David Yermack, researcher at the Bureau of Economic Research, New York University (2016) that bitcoin still fails to meet the criteria as a currency. It cites the basic functions of a currency, the medium of exchange, the a store of value, and the unit of account. Of the three criteria, bitcoin does not qualify as money. Yermack doubts that bitcoin can be a currency or means of payment acceptable to today's audiences. I agree with the analysis. If we look at bitcoin volatility in recent years is very high, much higher than the existing currency. This has an impact on the difficulty of calculating the short-term risks of bitcoin. In addition, the exchange rate of bitcoin in the day to day does not correlate at all with any currency in the world, nor with commodities such as gold for example. This makes bitcoin useless in risk management and difficult for the owner to hedge.

Let's look at one by one the money function on bitcoin for more details. First, as a medium of exchange. Bitcoin has no intrinsic value, so its value will depend largely on its usefulness in the economy or consumption. But in reality, today is still very small parties who use bitcoin in everyday life to make various payments. Few traders (merchants) are willing to accept bitcoin. Some countries such as Japan, for example, allow bitcoin to be used as a means of payment (not as legal tender or legal currency). But if we go to Japan, just a few, not to say very little, the store is willing to accept payment with bitcoin. Especially in other countries, including Indonesia. In other words, payments using bitcoins are currently very rare.

Second, as a unit of account. For users or buyers, we certainly look for ease in buying goods. For example, a bowl of chicken noodles cost Rp 25 thousand, a cup of coffee costs Rp 15 thousand. This will make it easy to calculate. But in the use of bitcoin, various problems arise, mainly due to its extreme volatility. The value of bitcoin can vary drastically from minute to minute. This makes it difficult for the seller to determine the price of an item. In addition, there is no uniform or fixed market price associated with bitcoin. I also tried to check on some bitcoin markets around the world, and the prices vary. This disparity, in the theory of market value, violates the law of one price for a currency. Why breaking? Because it is open most likely people to do arbitrage in the same market (buy cheap and sell high in commodities and the same time).

Third, as a store of value. When a currency serves as a store of value, the owner certainly has the expectation that the currency he holds can be obtained easily and can be redeemed for future goods or services as needed. The economic value of goods or services purchased in the future is expected to be equal to the money used or stored now.

From the above analysis it can be seen that Bitcoin, according to Yarmeck (2016), still can not meet the criteria as money because it has the deficiencies as above. Generally people currently hold bitcoin instead of being used as a means of payment, but rather to speculative investment. Bitcoin is also increasingly difficult to accept because it is disconnected with the payment system and banking in many countries, because most authorities in the world forbid it to be used as a means of payment.

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[rohqit]

Great post. I think the answer is in what you have stated .... the volatility. Based on that, the simple answer is NO. Bitcoin can never be currency as it currently is, no more than oil, gold, silver or pork bellies. Think about it,  buying something for 1 bitcoin 7 months ago equaled roughly $20,000. That same item would cost about 3 bitcoins now or $60,000 end of 2017 prices.. It fails on all 3 measures you mentioned, medium of exchange, store of value, unit of account.

Bitcoin is a means of wealth transfer, no more no less.

The only value Bitcoin has is still measured against real currency such as US dollars. Unless you expect the value of Bitcoin to drop vs USD no-one should be buying anything using bitcoin. Also, if I expected the value of bitcoin to rise, as a seller I would definitely accept Bitcoin as payment to take advantage of uninformed buyers. Seems the sellers are losing now, but that will change because this is still a young market and bitcoin has a long way to rise.

[PsylockReborn]

Due to the volatility of bitcoin's value as of now it will never be worthy to be a currency. For me personally I find bitcoin more as a store of value rather than use it as a currency for the fees are so high and sometimes slow transactions speed. Maybe few years from now when its value will be more stable then we could say that bitcoin is really worthy to be come a currency and use it in our everyday transactions.

[Escf4]

Bitcoin is one of the lead coin of the market on the cryptoworld ,then it can be worth to be a currency because it is circulating  in the internet, and it had a big price value enven if it is volatile then it can be ether used as investment and payment ,like any other currency.

[thinkabout]

Sure, it is our treading currency and It will replace fiat currency one day

[kimjongun92]

thanks so much for you sharing. For me, Bitcoin will always be a currency because it's really useful and it can give me control over my money

[kiemnhieutien]

Bitcoin is already accepted as a digital currency and many shops, stores accept it as a payment method. But no country accept it as fiat money as far as i know. In real life, Bitcoin now likes a high risk asset because its price is high volatility. If there is any cryptocurrency accepted as fiat, i think it'll not Bitcoin.

[Dudeperfect]

A currency something that is exchanged for goods and services by a large group of people. As the number of people having belief in Bitcoin is increasing, its authentication as a currency is also increasing. I agree that Bitcoin is highly volatile at this point making it difficult for the microtransactions to take place in the market but there is a reason for it. We are still in the basic phase of development and this innovation is still evolving. Things will get better down the road and we will see sustainable growth in the price and with the increase in mass awareness among the users, we will see less volatility in the price.

[drmilind2004]

Discuss about bitcoin and cryptocurrency. For me, this is an interesting topic because bitcoin issues are often the talk, including confusion in many quarters.

Great post! Thanks for introducing me to David Yermack's paper. Pity I don't have any sMerit on me; Yours is the kind of stuff that deserves Merits aplenty.  

[vit05]

If we look at bitcoin volatility in recent years is very high,

Volatility only exists because we still compare the price to fiat. And not with other products. When Bitcoin become more used around the world, the price will not jump like this. We are just seeing the speculation price because nobody has any idea what is the right price. But I do not think Bitcoin will ever be a universal currency that will dominate every market. But BTC could become a currency accepted everywhere as a second currency. It will be easy to tourist around the world using Bitcoin as a reference.

[Dexion]

bitcoin has good quality and quantity, sometimes corrections like today make us pessimistic, and think badly about bitcoin.

but, please believe now, the process of getting better is still long, I also believe that bitcoin will be perfect after passed many exams. after graduating from FUD bitcoin will become a very important currency and has a high value.

[wonderfulvn]

Why not ? Bitcoin is currency because bitcoin transaction id really fast and cheap. It also allowed to pay in some countries

[tobreak007]

Bitcoin is a profitable coin, It can help people worldwide improve their life a lot. So you should think about your post again

[wonderfulvn]

Absolutely Bitcoin is currency. It is stable store of value

[banoi]

In my opinion, it should not be because it has many loopholes and is very risky

[JoshyKulotski]

For me NO, in a good reason. If BTC will be approved as a currency, government will be adding it into your assets and if it is added on your assets definitely you will pay taxes. We all know that BTC has that outstanding value of thousands of dollars then if your country has a 10% of tax for every asset you will probably loss so much of money just in BTC.

[anavir]

If we look at bitcoin volatility in recent years is very high,

Volatility only exists because we still compare the price to fiat. And not with other products. When Bitcoin become more used around the world, the price will not jump like this. We are just seeing the speculation price because nobody has any idea what is the right price. But I do not think Bitcoin will ever be a universal currency that will dominate every market. But BTC could become a currency accepted everywhere as a second currency. It will be easy to tourist around the world using Bitcoin as a reference.

I agree with your statement that bitcoin could become a second currency only and be accepted anywhere but could not replace whatever monitary
unit a country had and one of the biggest reason is its volatility.

[maskeffec]

A good post, it's very difficult to accept Bitcoin as a legitimate currency, because the cost is very high and sometimes the transaction speed is slow. the volatility of the value of bitcoin will now never be worthy of being a currency. For me personally I find bitcoin more as a store of value than using it as a currency. maybe we have to be more patient and just enjoy what bitcoin provides, there will be a possibility a few years from now when the value will be more stable then we can say that bitcoin is really worthy of being used as a currency and using it in our daily transactions.

[Ararbermas]

For us which is already in crypto world perhaps yes ,because we already all knows how useful bitcoin is and it's a big help in our daily basis. However even though it is still impossible to become real currencry it's still worth it because of being friendly used.

[Kakmakr]

Great post. I think the answer is in what you have stated .... the volatility. Based on that, the simple answer is NO. Bitcoin can never be currency as it currently is, no more than oil, gold, silver or pork bellies. Think about it,  buying something for 1 bitcoin 7 months ago equaled roughly $20,000. That same item would cost about 3 bitcoins now or $60,000 end of 2017 prices.. It fails on all 3 measures you mentioned, medium of exchange, store of value, unit of account.

Bitcoin is a means of wealth transfer, no more no less.

The only value Bitcoin has is still measured against real currency such as US dollars. Unless you expect the value of Bitcoin to drop vs USD no-one should be buying anything using bitcoin. Also, if I expected the value of bitcoin to rise, as a seller I would definitely accept Bitcoin as payment to take advantage of uninformed buyers. Seems the sellers are losing now, but that will change because this is still a young market and bitcoin has a long way to rise.

Well, if you convert the bitcoins received, back to fiat immediately, you are not influenced by the volatility. Most companies use payment processors to do that, so they do not even know about the volatility, because they only see the fiat being deposited into their Bank accounts.

Also remember that volatility can be your friend. If someone paid you with a bitcoin in Jan 2017 and you only sold that Bitcoin in Dec 2017, then your profit on that sale would have been $18 000.