Is Bitcoin a Currency?

Bitcoin, the pioneering cryptocurrency, has sparked an ongoing debate since its inception: Is it a genuine currency or merely a speculative asset? While its proponents champion it as a decentralized alternative to traditional money, critics question its suitability as a medium of exchange, a unit of account, and a store of value – the three fundamental pillars of currency.

This discussion is not merely academic; it has profound implications for Bitcoin's role in the global financial system, its regulatory treatment, and its potential to reshape economies. In this article, we explore whether Bitcoin fulfills the criteria of a currency or occupies a unique category altogether.

The six pillars of the currency concept

To be considered a currency, an object must have all of the following base characteristics:

1. Durability – it must withstand physical wear and tear over time.
2. Portability – it must be easily carried and transferred from one person to another.
3. Divisibility – it can be broken into smaller denominations for flexible transactions.
4. Uniformity – each unit must have the same value and appearance.
5. Limited supply – it must have restricted availability to maintain its value.
6. Acceptability – it must be widely recognized and accepted as a medium of exchange.

Let's take a 1 US dollar bill, for example. We are certain that, if not burnt, left to humidity, or torn apart deliberately, the bill is going to keep its original form – that’s durability. It can be easily kept in a pocket or your bank account and transferred physically or via electronic payment to anybody – that’s portability. A US dollar can have smaller denominations – it is subdivided into 100 cents. That’s divisibility. All USD bills have the same appearance – that’s uniformity. Finally, it is a widely accepted means of transaction, being accepted all over the world. That’s acceptability.

Does Bitcoin meet the requirements of a currency? 

Let’s analyze if the leading cryptocurrency has all the needed characteristics to be considered a currency:

It is durable

Bitcoin is highly durable since it exists digitally on a decentralized blockchain network. Moreover, unlike physical cash, it cannot be physically damaged or degraded over time. As long as the blockchain continues to operate, Bitcoin transactions and balances remain intact indefinitely. However, its durability is dependent on secure digital storage solutions – if private keys are lost or compromised, Bitcoin can become permanently inaccessible.

It is portable

Bitcoin is extremely portable, as it can be transferred digitally across borders within minutes, regardless of geographic distance. Users can store and carry Bitcoin in digital wallets on smartphones and computers or even write it down as a seed phrase. Compared to physical cash or gold, Bitcoin offers superior portability, though it does rely on internet connectivity and technological infrastructure to facilitate transactions.

It is divisible

Bitcoin is highly divisible, with each Bitcoin being divisible into 100 million smaller units called satoshis. This level of divisibility allows for microtransactions and flexibility in pricing goods and services, making it more adaptable than traditional fiat currencies, which have lower divisibility thresholds.

It is not completely uniform

All Bitcoin units hold the same value as any other but might not have the same appearance. We can find an example of that in more recent history: a mining company – MARA Holdings – has engraved an AI portrait of Donald Trump on the Bitcoin blockchain, on the 'Trump 47' block, which was mined on January 17, 2025, by MARA's chairman and CEO Fred Thiel. Moreover, concerns arise regarding “tainted” Bitcoins linked to illicit activities, potentially affecting their perceived value and acceptance by certain institutions or exchanges.

It has limited supply

Bitcoin has a fixed supply of 21 million coins, enforced by its underlying code. This scarcity is designed to mimic precious metals like gold and prevent inflation, contrasting with fiat currencies that can be printed in unlimited quantities by central banks. Bitcoin’s limited supply strengthens its store-of-value proposition but may also contribute to price volatility.

It is not widely accepted

While Bitcoin is increasingly accepted by merchants and institutions worldwide, it has yet to achieve the universal acceptance of traditional fiat currencies like the US dollar. Its adoption is growing, but its extremely high volatility and lack of understanding among the general public hinder its widespread use as a primary medium of exchange.

Moreover, many governments would likely never abandon their urge to control every transaction inside the financial system in favor of a decentralized monetary system. Even if Donald Trump recently banned the development of CBDCs (Central Bank Digital Currencies) in the US, there are still many countries that are eager to implement them, such as Russia, Japan, Brazil, Australia, India, and China, which already have them in the pilot stage.

In addition to the above, a currency should serve as a dependable store of value, ensuring that the purchasing power of your money remains relatively consistent over time – whether it's today, tomorrow, or a year from now. Bitcoin, however, lacks stability. Its price has experienced extreme fluctuations, surging to new heights and plummeting sharply within just a matter of days.

Also, if we were to analyze the “Bitcoin strategic reserve” approved by Trump, the purpose of its accumulation in Federal reserves resembles such assets as Gold, more than other countries’ fiat currencies.

Conclusion

To sum up, by failing to meet all the necessary criteria to be considered a currency, Bitcoin fails to be one. Its extreme price volatility, regulatory uncertainties, and limited mainstream adoption prevent it from functioning as a reliable medium of exchange or store of value on a global scale. Additionally, the reluctance of governments to cede control over financial systems to a decentralized asset further hinders Bitcoin's potential to replace traditional currencies.

Instead, Bitcoin has carved out a niche as a speculative asset, akin to digital gold, attracting investors seeking high returns and a hedge against inflation rather than a stable means of everyday transactions. The recent approval of a “Bitcoin strategic reserve” in the US underlines its positioning more as a reserve asset than a practical currency alternative.

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