What’s Bitcoin and Can It Be a Good Investment?

Bitcoin has a reduced risk of collapse Unlike traditional currencies that rely on authorities. When currencies fall, it leads to hyperinflation or the wipeout of someone’s savings in an instant. Bitcoin exchange rate isn’t controlled by any government and is an electronic money available globally.

Bitcoin isn’t hard to carry. A billion Bucks in the Bitcoin can be saved in a memory stick and placed in one’s pocket. It is so easy to transport Bitcoins compared to paper cash.

The general idea is that Bitcoins Are ‘mined’… intriguing expression here… by solving an increasingly difficult mathematical formula -more difficult as more Bitcoins are ‘mined’ into existence; again intriguing- on a computer. Once created, the new Bitcoin is set into an electronic ‘wallet’. It’s then possible to exchange actual goods or Fiat currency for Bitcoins… and vice versa. Additionally, since there’s not any central issuer of Bitcoins, it is all highly distributed, thus resistant to being ‘managed’ by authority.

Naturally proponents of Bitcoin, Those who benefit from the growth of Bitcoin, insist fairly loud that ‘for sure, Bitcoin is money’… and not just that, but ‘it is the best money ever, the cash of the future’, etc.. . Well, the proponents of Fiat shout as loudly that paper currency is money… and most of us know that Fiat paper is not cash by any means, as it lacks the most important attributes of real money. The issue then is does Bitcoin even qualify as cash… never mind that it being the money of the future, or the very best money ever.

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

The primary condition is that a lot Tougher; money must be a stable store of value… now Bitcoins have gone out of a ‘value’ of $3.00 to around $1,000, in only a few years. That is about as far from being a ‘stable store of value’; as you can get! Indeed, such profits are a perfect illustration of a speculative boom… such as Dutch tulip bulbs, or junior mining companies, or even Nortel stocks. As we have just stated, bitcoin revolution is something that cannot be ignored – or at least should never be ignored. There are so many possibilities and variations – twists and turns, that hopefully you see how difficult it can be to cover all bases. There is a lot, we know, and that is the reason why we are taking a very short break to state a few words about this. We are highly confident about the ability of what we offer, today, to create a difference. The balance of this document is not to be overlooked since it can make a huge difference.

Naturally, Fiat fails here as well; For instance, the US Dollar, the ‘main’ Fiat, has dropped over 95% of its worth in a few decades… neither fiat nor Bitcoin qualify in the most crucial measure of cash; the capacity to store value and conserve value through time. Actual money, that is Gold, has shown the ability to maintain value not only for centuries, except for eons. Neither Fiat nor Bitcoin has this crucial capacity… both neglect as money.

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

So how do we set the value of Fiat… ? Through the concept of ‘purchasing power’… that is, the worth of Fiat depends upon what it can be exchanged for… a so called ‘basket of goods’. But his clearly suggests that Fiat has no significance of its own, but instead appreciate flows from the value of their goods and services it may be exchanged for. Causality flows from the merchandise ‘purchased’ into the Fiat number. After all, what difference is there between a 1 Dollar bill and a hundred Dollar bill, except the number printed on it… along with the purchasing power of this number?

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