Bitcoin has become a household name in 2024, with its roller-coaster prices attracting speculators. But beyond trading, what real-world utility does Bitcoin offer? Is it a currency or a commodity? Let's break it down.
The 3 Functions of Money: Does Bitcoin Qualify?
For Bitcoin to be considered money, it must fulfill these roles:
- Medium of exchange: Used for transactions
- Store of value: Preserves purchasing power
- Unit of account: Measures relative worth
1. Bitcoin as Payment Method
While Bitcoin can buy anything from pizza to Porsches, adoption remains limited:
- Luxury Cars: Bitcars and AutoCoinCars accept BTC for most models (except Teslas)
- Food Delivery: Lieferando (Germany) and Just Eat (France) partners accept crypto
- Art: Sotheby's and Singulart process Bitcoin transactions
- Charity: Red Cross and Save the Children accept BTC donations
👉 Where to spend Bitcoin today
Most transactions convert BTC to fiat first via services like PayPal's crypto feature - indicating its immature status as currency.
2. Storing Value: Bitcoin's Volatility Problem
With wild price swings (up to 30% daily moves), Bitcoin fails as reliable "digital gold." Unlike fiat currencies backed by governments or gold's industrial uses, BTC derives value solely from market speculation.
3. Pricing Goods in Bitcoin? Not Happening
Since most BTC trading pairs use USD and merchants instantly convert payments, Bitcoin lacks real-world pricing power. You'll never see a car priced at "3.5 BTC" - only USD equivalents.
War-Tested: Bitcoin in the Ukraine Crisis
The Russia-Ukraine conflict demonstrated Bitcoin's unique advantages:
(1) Digital Portability
When banks froze and currencies collapsed, Ukrainians transferred wealth via:
- USDT (stablecoin)
- Bitcoin (for long-term preservation)
Unlike physical gold, crypto wallets fit in your brain (via seed phrases).
(2) Scarcity Protocol
With fixed supply (21 million BTC) and halving events every 4 years, Bitcoin outshines inflation-prone fiat money. No government can print more.
(3) Inflation Hedge
While fiat loses 7-15% annually to inflation, Bitcoin has appreciated ~200% yearly since 2010.
👉 How to inflation-proof your portfolio
El Salvador's Bitcoin Experiment: Lessons Learned
In 2021, El Salvador became the first country to adopt Bitcoin as legal tender alongside USD. Results were mixed:
| Problem | Consequence |
|---|---|
| Technical failures | ATM outages caused protests |
| Price volatility | $20M+ losses on national BTC purchases |
| IMF warnings | Threat to financial stability |
Key takeaway: National adoption amplifies Bitcoin's weaknesses rather than solving them.
The Future: Stablecoins Over Bitcoin?
While Bitcoin excels as "digital gold," stablecoins (crypto pegged to fiat) better suit daily transactions due to:
- Price stability
- Regulatory compliance
- Instant settlements
Japan's 2022 Stablecoin Act exemplifies this trend, requiring:
- Fiat collateralization
- Guaranteed redemptions
- Licensed issuers
FAQs
Q: Can Bitcoin replace the US dollar?
A: Not currently - volatility and scalability issues prevent mass adoption. Stablecoins are more viable contenders.
Q: Is Bitcoin illegal anywhere?
A: China prohibits BTC transactions, but most countries allow ownership while restricting merchant acceptance.
Q: How do I safely store Bitcoin?
A: Use hardware wallets (Ledger/Trezor) for large amounts, and trusted exchanges for active trading.
Q: Why does Bitcoin's price change so much?
A: Limited liquidity, speculative trading, and macroeconomic factors all contribute to volatility.
Q: Can Bitcoin transactions be reversed?
A: Never - this immutability prevents fraud but demands careful transfers.
Final Verdict: Commodity First, Currency Maybe Later
Bitcoin today functions best as:
- A speculative asset
- Inflation hedge
- Emergency value transfer tool