Business: cryptocurrency, part 0: why so popular, part 0?
Self-tutoring about business: the tutor looks at the popularity of cryptocurrencies.
For the casual observer, cryptocurrencies are an inescapable topic in business today. Bitcoin, for example, has risen to a price of around $40K (Canadian) since 2010, when it cost 10,000 Bitcoin for two pizzas valued around $25 US.
Investors can’t help but sense potential to make money speculating on cryptocurrencies, but cryptocurrencies are not necessarily meant for investment. Rather, currencies, including crypto ones, are meant to facilitate trade. That is, they’re meant to exchange value, not hold value.
Theoretically, a functional currency holds value as well as transfers it. Before 1971, the US dollar was officially redeemable for gold at $35 USD per ounce. The US abandoned the gold standard in 1971. Today, gold is around $2000 USD per ounce. In gold, the USD is 35/2000, or around 1.75%, of its value in 1971.
Gold is the traditional hedge against inflation in many societies, but it’s inconvenient to trade. Perhaps some people, witnessing the decline of the US dollar, are more confident about Bitcoin, even with its outrageous fluctuations.
Source:
Jack of Oracle Tutoring by Jack and Diane, Campbell River, BC.
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