(via ZEXPR) We all have seen how the highs and lows of Bitcoin are coming and going. Sometimes it has followed a consistent high and most investors go on to say that the rise will continue. But at the same time, the currency proves itself to be volatile by giving us a downfall in a matter of days.
With how trending this cryptocurrency has become over time and especially due to this pandemic, it does not mean that we can officially give it the term “money”.
Well obviously, not yet anyway.
The market size of cryptocurrencies keeps on increasing and this year in January it managed to reach the biggest milestone in the market by hitting the $1 trillion (yes, you heard it right!) in value. And guess what? Bitcoin has taken up two-thirds of that said value. Now we can even say that the market size of all asset classes, stocks, commodities, indices, bonds, etc. also includes crypto.
Though still, this does not make bitcoin or any other cryptocurrency money.
Why is it so?
Well, this might be a little surprising to cryptocurrency lovers who keep roaring that Bitcoin will be the greatest and most innovative future of money. The issue is in understanding this scenario is that Bitcoin does not even partake in all the three characteristics of money.
The Investment Center’s broker Don Adams enlightens these three characteristics and how Bitcoin is actually falling short of them. Of course, money can literally be anything we choose it to be whether it is rocks, pebbles, or even shells. But if it is lacking the following three attributes then it cannot be considered money by any means.
- Unit of account
The way we measure anything that has wealth, value, and even debt is via its unit of account. Unit of account happened to be the most important attribute that money needs to follow. For now, all I can observe is that no one is trying to prepare their personal accounts of businesses with Bitcoins. Everyone is way too skeptical about its rise and fall to even consider completely depending on it.
In its place, everyone is using fiat money, dollar, and other currencies, to make their transactions today. Even though Tesla is investing heavily in Bitcoin yet its unit of account to this day remains to be in dollars. You can check out their official website to be assured.
- Medium of Money
So, it is an understood thing that money needs to be a medium of exchange. It needs to something that you use to buy your regular goods and services. Now, if you observe in The United States people are making use of the dollars to make their transactions, in The United Kingdom people are using pounds, Sterling, just like that in Europe people are observed in The United States people are making use of the dollars to make their transactions, in The United Kingdom people are using pounds, Sterling, just like that in Europe people are using euro as their medium of exchange.
To this day none of the cryptocurrencies have reached this level of popularity and ease to be used by the general public for their everyday transactions. Bitcoin or cryptocurrencies are not how anyone is buying their everyday goods and services.
- Store of Value
If you want to consider something to be money, then it has to be able to buy pretty much the equal worth of goods and services. It has to be something that remains the same in value tomorrow and it will today. This shows that Money must be a store of value, Bitcoin on the other hand cannot be considered that, yet.
Keeping in view the above two points that have been discussed we can now say that Bitcoin does not hold the 3 key characteristics of money. Pretty soon Bitcoin will hit the mark of $60,000 and it may very well keep on increasing but the fact remains the same that it just cannot be considered money unless or until it does have the three attributes discussed. Bitcoin actually reached $61,700 in mid-March, considering what the price of Bitcoin is right now i.e., $57,729.50. This clearly shows that it is a very volatile cryptocurrency.
If money does not have these characteristics then it will lose the title. Let’s suppose that a currency does not have even one of the mentioned characteristics then it will automatically fall short of the rest of the characteristics.
Clearly, as of now, bitcoin or any other cryptocurrency does not have these very important characteristics. To be considered money the assets need to follow the said attributes and it seems like for Bitcoin it will take quite a while to be called currency.
Disclaimer: Our content is intended to be used for informational purposes only. It is very important to do your own research before making any investment based on your own personal circumstances. You should take independent financial advice from a professional in connection with, or independently research and verify, any information that you find on this article and wish to rely upon, whether for the purpose of making an investment decision or otherwise.