Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Fasten Your Seatbelts Stock Market Make Or Break – Big Trends Ahead - 17th Sep 20
Peak Financialism And Post-Capitalist Economics - 17th Sep 20
Challenges of Working from Home - 17th Sep 20
Sheffield Heading for Coronavirus Lockdown as Covid Deaths Pass 432 - 17th Sep 20
What Does this Valuable Gold Miners Indicator Say Now? - 16th Sep 20
President Trump and Crimes Against Humanity - 16th Sep 20
Slow Economic Recovery from CoronaVirus Unlikely to Impede Strong Demand for Metals - 16th Sep 20
Why the Knives Are Out for Trump’s Fed Critic Judy Shelton - 16th Sep 20
Operation Moonshot: Get Ready for Millions of New COVAIDS Positives in the UK! - 16th Sep 20
Stock Market Approaching Correction Objective - 15th Sep 20
Look at This Big Reminder of Stock Market Mania - 15th Sep 20
Three Key Principles for Successful Disruption Investors - 15th Sep 20
Billionaire Hedge Fund Manager Warns of 10% Inflation - 15th Sep 20
Gold Price Reaches $2,000 Amid Dollar Depreciation - 15th Sep 20
GLD, IAU Big Gold ETF Buying MIA - 14th Sep 20
Why Bill Gates Is Betting Millions on Synthetic Biology - 14th Sep 20
Stock Market SPY Expectations For The Rest Of September - 14th Sep 20
Gold Price Gann Angle Update - 14th Sep 20
Stock Market Recovery from the Sharp Correction Goes On - 14th Sep 20
Is this the End of Capitalism? - 13th Sep 20
The Silver Big Prize - 13th Sep 20
U.S. Shares Plunged. Is Gold Next? - 13th Sep 20
Why Are 7,500 Oil Barrels Floating on this London Lake? - 13th Sep 20
Sheffield 432 Covid-19 Deaths, Last City Centre Shop Before Next Lockdown - 13th Sep 20
Biden or Trump Will Keep The Money Spigots Open - 13th Sep 20
Gold And Silver Up, Down, Sideways, Up - 13th Sep 20
Does the Stock Market Really "See" the Future? - 12th Sept 20
Basel III and Gold, Silver and Platinum - 12th Sept 20
Tech Stocks FANG Index Nearing Critical Support – Could Breakout At Any Moment - 12th Sept 20
The Tech Stocks Quantum AI EXPLOSION is Coming! - 12th Sept 20
AMD Zen 3 Ryzen 4000 Questions Answered on Cores, Prices, Benchmarks and Threadripper Launch - 12th Sept 20
The Inflation Mega-trend is Going Hyper! - 11th Sep 20
Gold / Silver Ratio: Slowly I Toined… - 11th Sep 20
Stock Market Correction or Reversal? The Jury Isn't Out! - 11th Sep 20
Crude Oil – The Bearish Outlook Remains - 11th Sep 20
Crude Oil Breaks Lower – Sparking Fears Of Another Sub $30 Price Collapse - 11th Sep 20
Inflation by Fiat - 10th Sep 20
Unemployment Rate Drops. Will It Drag Gold Down? - 10th Sep 20
How Does The Global Economy Recover After This Global Pandemic? - 10th Sep 20
The Best Mobile Casino - 10th Sep 20
QE4EVER! - 9th Sep 20
AMD Ryzen Zen 3 4800x 10 Core 5ghz CPU, Cinebench Benchmark Scores (Est.) - 9th Sep 20
Stock Traders’ Dreams Come True – Big Technical Price Swings Pending on SP500 - 9th Sep 20
Should You Be Concerned About The Stock Market Big Downside Rotation? - 9th Sep 20
Options Traders Keep "Opting" for Even Higher Stock Market Prices - 8th Sep 20
Gold Stocks in Correction Mode - 8th Sep 20
The law of long-term time preference and Gold ownership - 8th Sep 20
Gold Bull Markets: History and Prospects Ahead - 8th Sep 20
Sheffield City Centre Coronavirus Shopping Opera Ahead of Second Covid-19 Peak - 8th Sep 20
Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
From Trump’s TikTok Mess to US Tech Cold War against China - 7th Sep 20
The Federal Reserve vs. Judy Shelton And Gold - 7th Sep 20
Fed Dials Up Inflation Target…Own Gold - 7th Sep 20
Does Gold Still Have Plenty of Potential? - 7th Sep 20
CDC Shock Admission - THERE IS NO PANDEMIC! Over 90% of Deaths NOT From COVID19 - 7th Sep 20
Stock Market SPX to Gold/Silver Ratios Explored – What To Expect Next - 7th Sep 20
Is the Precious Metals Market really Overwhelmed and Chaotic - 7th Sep 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Does Bitcoin Have Value; Is It Money?

Currencies / Bitcoin Dec 29, 2019 - 06:57 PM GMT

By: Kelsey_Williams


Writing about Bitcoin is a challenge for several reasons. It has a short history (ten years), it is highly complex, and there is a certain vagueness to the logic behind the concept. When reading about it, or listening to explanations, I wonder whether or not I understand it adequately. I also wonder how many others do.

Much has already been written and discussed, such that further commentary might be superfluous. But some additional perspective likely won’t hurt. So, for those who asked…

What is it? Bitcoin, simply stated, is a form of digital currency.  That is how most people describe it when pressed for an acceptable answer. That does not make Bitcoin unique, though, since most of our money supply today is in the form of digital currency.

Computer technology has changed the way we bank, shop, pay bills, and send money. We also get paid electronically and access our earnings via smart phones and computers. So what is it that makes Bitcoin different?


Bitcoin is a cryptocurrency.  “A cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of exchange that uses strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets. Cryptocurrencies use decentralized control as opposed to centralized digital currency and central banking systems.”   …Wikipedia

Then what makes Bitcoin (or any other cryptocurrency) a currency? Let’s define currency…

Currency is a generally accepted form of money, including coins and paper notes, which is issued by a government and circulated within an economy. Used as a medium of exchange for goods and services, currency is the basis for trade.”  …Investopedia

Accordingly, Bitcoin is not yet a currency because it is not a “generally accepted form of money” but, as it increases in use as a ”medium of exchange for goods and services”, and becomes more generally accepted as a form of money, then its credence as a currency is enhanced, whether or not it is issued by a government.

Good; but, there should be a useful advantage to Bitcoin and cryptocurrencies. It should be something that gives them additional value over other forms of digital currency.

A possible advantage is found in the definition above: “Cryptocurrencies use decentralized control as opposed to centralized digital currency and central banking systems”.

The advent of digital technology allows us to communicate and transact business in real time – without being face to face.

Doing so, however, requires verification. Transactions that occur over the internet require a third party for verification. A middle-man, if you will; which generally means a bank.

If I use a debit card or credit card, any transaction is authorized instantaneously by the institution or bank. The bank is verifying that funds are available in the form of either cash or credit, whichever is applicable to the particular transaction. A seller, or vendor, is guaranteed payment and the purchaser has a confirmed record of payment to the other party/seller.

Bitcoin and other cryptocurrencies offer the potential to avoid the third party. Hence, transactions using Bitcoin or other cryptocurrencies are ‘private’ and still instantaneous.

But how does a seller know that a purchaser has Bitcoin to spend and that payment can be received in ‘good form’?

The answer is that every single Bitcoin transaction is recorded within  a decentralized tracking system. We might say there is no middleman; rather,  a universal, exterior history.

Proponents of Bitcoin claim that the elimination of a middleman/bank and the resulting privacy are huge benefits. In addition, it is possible that transaction fees could be limited or non-existent.

The privacy is attractive for tax and regulatory reasons, yes. Those items are obstacles to free trade. But it is probably not realistic to think that the system will be allowed to function unimpeded on its own for long, if it is successful.

It is naive and short-sighted to think that those who claim to have regulatory authority would sit idly by without making a concerted attempt to intercede.


As an ‘alternative’ medium of exchange, Bitcoin has been described and characterized as a form of money. But is it?

Money has three distinct characteristics: medium of exchange, measure of value, store of value. 

Bitcoin and other cryptocurrencies are, to a limited extent, mediums of exchange. But are they a measure of value?  I don’t think so.

Money is used to value other items – by price. For example, under our current monetary system, we place a relative value on various goods and services by attaching a price to it.

All of the goods and services we buy and sell including our own labor, education, and our very lives for that matter, have value. The value of various items is determined and a price is affixed using a commonly accepted medium of exchange. For purposes of this discussion, that medium of exchange is the US dollar.

However, the perceived value is subjective. An item’s value can vary from one individual to another and with the passage of time.

Lets say a furniture store has a sofa for sale at $995.00. After six months, the sofa is still in the store and still offered at $995.00. So the manager marks it dow to $749.00 and it sells the next day.

Did the sofa lose value over six months? No. And people’s perception of its value likely didn’t change, either. It was probably overpriced to begin with. Which means that its value was overstated originally.

The price of something can be an indication of its value but only in the context that there is a measure of value (in this case, dollars) that is accepted independently and universally.

For Bitcoin to be considered money, it would have to function as a measure of value: How many Bitcoins is the sofa worth?

We don’t know because there is no reasonably reliable application of value for Bitcoin. In other words, how much is Bitcoin worth? Who knows? At least with US dollars – for now, anyway – they serve as a medium of exchange and a measure of value.

Obviously, there is no possibility for Bitcoin to be termed a store of value. This is true not just because it is impossible to  determine its value. It is also true because there is no history of sufficient length to provide evidence of store of value. Sufficient evidence would require centuries.

So, if Bitcoin isn’t money, what is it? And does it have value?

How do you determine a value for nothing? A sofa has value. Companies that produce and provide goods and services have value. Real money (i.e. gold) has value.  The much-maligned US dollar, a paper substitute for real money, has  a commonly accepted, implied value.

Bitcoin is a digital creation which has no value in and of itself. As such, it can never be used as a measure of value for anything else. Think of it this way: How many Bitcoins is your house worth? How many Bitcoins will your next car cost? If you can answer those questions without any calculations, you will know that Bitcoin has become “a generally accepted form of money”.


Bitcoin is a process for the transfer of money. But the money being transferred at each transaction is US dollars, the currently accepted medium of exchange.

When a dealer accepts Bitcoin in trade, they are really accepting enough Bitcoin to equal the amount of US dollars agreed upon by both parties. There is a fixed price for the dress you want to buy online, but it is priced in US dollars, not Bitcoin.

The transfer process has value, but not the Bitcoin itself. And, if that is the case, what makes one cryptocurrency’s value different from any other?

Think of it this way: How much of a difference in value to you is there between your bank-issued debit card and a debit card issued by any of the other competing banks?

If you said “little or none”  you are correct.  So why is Bitcoin’s price so radically different from Litecoin? or Zcash? It seems sort of like different denominations and colors of Monopoly Money.

Bitcoin and other similar digital monies are referred to as cryptocurrencies. However, they are not currencies because they are not “generally accepted form(s) of money”.

In addition, Bitcoin and other cryptocurrencies are not money because they have no value. Thus, they cannot be a measure of value or a medium of exchange.

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED!

By Kelsey Williams

Kelsey Williams is a retired financial professional living in Southern Utah.  His website, Kelsey’s Gold Facts, contains self-authored articles written for the purpose of educating others about Gold within an historical context.

© 2019 Copyright Kelsey Williams - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules