For many years now, there has been no single answer to this question. Many people have attempted to define Bitcoin as a form of digital currency while others have explained it as a commodity.
Amidst the search for the true definition or classification of Bitcoin, one thing has remained common: Bitcoin is more than one thing. Some argue that it lacks use value while others insist that it is difficult to understand.
In this post, we’ll attempt to answer the question of whether Bitcoin is a currency or a commodity. And we hope that at the end of the read, you’ll be able to decide for yourself what best describes Bitcoin.
Why do You Know about Bitcoin?
Before focusing on what Bitcoin truly is, let’s discuss the things we know about it. Since 2009, Bitcoin has been known as the number one cryptocurrency which cannot be regulated or monitored by government agencies or monetary authorities.
Bitcoin is popular for increasing and decreasing in price, consistently reacting to changes in the market and bearing a highly volatile nature. This electronically-used currency can only be accessed on the computer compared to dollar, euro or yen notes which are available in paper form.
The number of Bitcoin in existence is based on the activity of people who solve computer or mathermatical problems during mining. According to Satoshi Nakamoto, Bitcoin is a means of payment which is independent of country or government and can be used in all parts of the globe for exchange.
Again, Bitcoin has only 21 million coins which authenticate the fact that this digital currency is a fixed asset. The best part: anyone in any part of the world can receive, send, or trade with Bitcoin. Besides the fact that this cryptocurrency is fast, it is anonymous to an extent and hardly requires the personal data of its owners.
Transactions made with Bitcoin are fast and private especially when they are conducted with Lightning Network.
Bitcoin Explained on Youtube
Goldman Sach's Expert Jeff Currie Says Bitcoin Is a Commodity
Is Bitcoin a Currency Used to Improve Commerce?
In trying to understand the actual nature of Bitcoin, many people have asked if it is a currency. The first question here should be: what is a currency? A currency can be a paper money, a medium of exchange, or anything being circulated as a medium of exchange.
Now, since Bitcoin doesn’t fit the first definition of being a paper money, it’s easy to conclude that it’s not a currency. However, it agrees with the other definitions as a medium of exchange which is being circulated.
BTC has generally been used to make purchases and invest. In fact, it is still being used to buy goods, pay for services, donate to charity, and travel the world. Many apps and gambling sites also accept Bitcoin as a medium of payment. Bitcoin owners equally send BTC to their loved ones as gifts via Bitcoin wallets.
So the real question here should be: what kind of currency is Bitcoin? In simple words, we can describe Bitcoin as a global currency which isn’t restricted by country or government. It is a product of technology which disempowers regulatory bodies and improves the exchange of services and investment across the globe.
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Bitcoin vs. US Dollar
Comparing Bitcoin to the US dollar gives us a different perspective. Bitcoin is often compared to the dollar because the US currency is the world’s reserve currency and it’s the only currency which enables people to purchase goods and services in the largest markets of the world which have use value.
However, unlike the dollar which has relative stability, Bitcoin is often unpredictable. You may go to bed with the Bitcoin price being high, but in the morning, there has been a massive crash. Currencies aren’t meant to fluctuate consistently otherwise buyers and sellers may become skeptic and unwilling to buy goods or services.
Now, this is the problem with Bitcoin. Even if the price of currencies rise and fall from time to time, they are still dependable for their use value. With the dollar, for example, you can walk into the market in the US or any market which accepts payment in dollar and buy whatever you want.
The problem with Bitcoin is that nothing is certain. Bitcoin owners and investors are usually advised to trade with caution as nothing is predictable. Sellers of goods and services which can be purchased with Bitcoin continually defer sales of their goods till the future time because they suspect that the price of Bitcoin may rise. Is such situation common with the regular currency? No!
This therefore leads us to the other aspect of this question. Is Bitcoin a commodity?
Does Bitcoin have Intrinsic Value Subjected to Demand and Supply?
It is safer to say that Bitcoin is a commodity which possesses use value and can return exchange value. To get Bitcoin’s value, you need to juxtapose it with the dollar.
To back this position, we have the 2015 ruling of the US judge which declared Bitcoin as a commodity. Judge Weinstein in Brooklyn insisted that Bitcoin and other virtual currencies can be regulated by the US Commodity Futures Trading Commission as commodities.
In essence, Bitcoin fulfills the actual meaning of commodity which has its value based on changes in the market. There’s no denying the fact that the crypto markets is often characterized by bullish and bearish trends which traders often have to monitor with indicators and other technical tools.
Nonetheless, it’s true that commodities have been used as currency throughout history. Gold for one has been used as a medium of exchange and a means to support paper currencies. Other examples of commodities which have been used as currencies include cigarette, spices, salt, and blue jeans.
Despite these parallels, it is still difficult to draw the line. Some see Bitcoin as a digital currency for global transactions while others consider it to be a digital commodity that remains the same irrespective of where it is mined or exchanged.
Final Thoughts about BTC
We hope we haven’t left you more confused than you probably previously were. This post has attempted to classify Bitcoin as a commodity rather than a currency.
While different schools of thoughts hold diverse views about Bitcoin, one thing remains more important: the true status of Bitcoin is determined by how you use it. Bitcoin can be a currency, commodity or security; it all boils down to you.
In all, Bitcoin’s classification depends on what you use it for. So the question for you is: what do you use Bitcoin for? That’s where the true answer to the question at the beginning of this article lies.