Staff Reports
A lot of people wonder if Bitcoin is something they should try. They hear about it in the news, with many investment houses considering using it as an alternative to the U.S. dollar.
In addressing the question of Bitcoin being a reliable option for your financial needs, it helps to know the ancient definition of a quality currency. The five qualifications cited by Aristotle for an ideal currency are: convertibility, portability, divisibility, utility, and durability. Which of these qualifications does Bitcoin meet?
Bitcoin is hard to convert. Not all companies accept it in payment. You have to find special vendors who accept Bitcoin and another currency for payments.
Is Bitcoin portable? It is if you own an electronic device.
There are some physical varieties of Bitcoin, but a lot of folks note the U.S. government does not like competition to Federal Reserve Bank notes.
There has been a case where the U.S. Financial Crimes Enforcement Network has forced a physical bitcoin seller to stop their selling. The portability of Bitcoin can thus be questioned for physical purchases.
The divisibility of Bitcoin is possible. There are different units of Bitcoin available. This aspect of an ideal currency is acceptable by Bitcoin.
The utility of Bitcoin has to do with what is it actually good for. Currently, there are about the equivalent of $1.5 billion (US) in Bitcoin in active circulation.
The value of a currency is determined by the supply and demand for it. Right now, it seems that there is a market for Bitcoin, but the businesses that accept it are limited.
The durability of Bitcoin is poor. If the Bitcoin currency network ever shuts down, everyone’s savings in that currency will be wiped out.
Based on the ancient analysis, Bitcoin fails the qualifications of convertibility, portability, utility, and durability. It only passes the qualification of divisibility. A wise investor would be careful to consider the ancient requirements before overloading the portfolio in something that has poor obedience to the classical standards of a solid monetary system.
A better alternative is holding a diversified portfolio of cash, land, jewelry, commodities, precious metals, and even some bitcoin.
Never put all your eggs in one basket. Know the risks associated with each basket you have.
