The Evolving Economics of Bitcoin, Gold and Fiat Currencies (cmegroup.com)
An inherent tension exists between the two major purposes of money. Currencies that are perceived as great stores of value, such as gold and bitcoin, make for poor mediums of exchange. By contrast, currencies that are effective mediums of exchange, such as fiat currencies used the world over, can make for dubious stores of value. Where a currency falls on the store of value versus medium of exchange spectrum influences its usefulness as a unit of account and a standard of deferred payment.
Supply Scarcity and Stores of Value
As stores of value, many investors perceive gold and, more recently, bitcoin as second to none. Since 1971, gold has appreciated from $35 per ounce to around $1,300 at the time of this writing, a gain of over 3,500%. Bitcoins have done even better. On July 19, 2010, a bitcoin was worth $0.08. At the time of this writing, it’s priced close to $5,300 per bitcoin, a gain of over 6,000,000% in seven years. Not bad! Read more...
