To be sure, not all economists would agree that bitcoin is money. But in this article we ignore all those politically motivated economists and focus on facts and invoke reason.
And it is good day to think about whether bitcoins are money because in this first week of 2017 the price for one bitcoin has rissen over $1000 exchange value. So, Happy New Year to all you bitcoin holders!
At the heart of our answer as to why bitcoins is genuine money lays Ludwig von Mises regression theorem. Ludwig von Mises is perhaps the greatest economist of the 20th century and exponent of the school of Austrian Economics. In his regression theorem Mises shows that today’s fiat currencies (dollar, euro, pesos) must have originated from commodity moneys, such as gold, silver or pressed tea leaves in India. These commodity moneys have intrinsic values. Out of gold one can forge jewelry, or tea leaves make a hot beverage. The regression theorem includes the problem of the double-coincidence of wants, that is to trade cattle for a meal or one needs a medium of exchange. Historically, common forms of these mediums of exchange were grains of salt, gold coins. Today, we use paper fiat money. These moneys have useful in its own right because they facilitate exchange. That is a typical $20 bill has perhaps only a few cents commodity value (that is paper) and the rest if it, that is $19.98 is pure exchange value.
Have bitcoins commodity value? No. Ok, some economist argue they due because they regard the block chain as a commodity. But let’s leave them aside. But it doesn’t matter. Without any commodity value bitcoins derive their value solely from its exchange value. That is the value of a bitcoins is 100% exchange value. Thus, the Mises’ regression theorem applies and bitcoins is money.
If you still doubt this reasoning, visit overstock.com and buy yourself some sports equipment, household goods or a trip on a cruise liner. If you still not yet convinced whether bitcoins are genuine money ask one of our fabulous economics tutors.
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