Buying and Selling Bitcoin: Things to Understand

Is Bitcoin a real currency? It is a vast, almost philosophical debate, but this article will try to provide you with some lines of reflection. To be a widely accepted means of payment and a store of value, money must be an object with the following properties: non-perishable, identifiable, difficult to counterfeit, easy to carry, easy to store, fungible and divisible. Does the bitcoin have these properties?

  • Non-perishable: Obviously, yes.
  • Identifiable: To the ways of banknotes, each bitcoin has its own number. So yes, clearly identifiable.
  • Difficult to counterfeit: Impossible to counterfeit, but a person with enough computer resources could try to use a single bitcoin to make several payments.
  • Easy to carry and store: As long as you have a smartphone or a computer, it is easy to store and transport a lot of bitcoins.
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  • Tangible: In the same way that a gold ingot is interchangeable with a gold ingot, a bitcoin is interchangeable with another bitcoin. It is, therefore, tangible.
  • Divisible: A bitcoin can be subdivided into 100 million units.

At first sight, the bitcoin has all the properties of a currency. But this does not guarantee its success, especially with those that purchase bitcoin with credit card. Indeed, to succeed, a currency must inspire confidence and, above all, be useful. Both are intimately linked. To inspire confidence, the bitcoin must intimately convince its users that they will be able to exchange their bitcoins for goods and services at any time. The users of a currency are part of a vast exchange network, and the value of this network increases because of the number of people who compose it. To be truly useful, the bitcoin must be accepted by enough people.

Bitcoin had a very good year in 2016; the electronic currency jumped 120% last year exceeding the $1,000 per bitcoin mark. This has allowed the currency to take advantage of the rising political risks and, in particular, of everything that the currency touches. When the Fed, the ECB, and the Bank of Japan are turning to monetary printing in full force, the bitcoin experience is a small example of the functioning of a monetary system free of central bank intervention. A decorrelated system of reference currencies that is appealing when the latter seem to escape control.

 

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