In 1999, prophetic economist Milton Friedman, winner of the 1976 Nobel prize in economics, said, "I think the internet is going to be one of the major forces for reducing the role of government. The one thing that's missing, but that will soon be developed, is a reliable e-cash."
Bitcoin, and other cryptocurrencies are attempting to fill Friedman's void. But can Bitcoin be regarded as money? Since its introduction in January 2009, the currency has expanded by 1,624,036% measured against the U.S. dollar rising from $0.04 to $7,638.62 on June 2, 2018.
During this same period of time, the price of gold (in U.S. dollars) climbed by 6.4%, and the value of the U.S. dollar against the Eurozone currency, the Euro, actually declined by 9.7%.
To serve as money, whether dollar, gold or Bitcoin, it must first be a medium of exchange, and second a store of value. How has each served these two functions?
Medium of exchange (acceptance): According to Coinmap.org, 11,291 businesses accepted Bitcoin for payment of products and services at the end of 2017. Despite acceptance rates growing by 38% per year, less than one in 700 U.S. businesses accepted Bitcoin as a unit of payment at the end of 2017. Data on the acceptance of gold to purchase goods and services were not available, but 100% of U.S. businesses are legally required to accept the U.S. dollar for payment for goods and services.
Store of value: In 2017 against the Euro, the Bitcoin varied by 71.3% from its average, the U.S. dollar varied by 7.3% from its average, and gold deviated by only 0.1% from its average. Since the beginning of this year against the Euro, Bitcoin plummeted by 50.2%, the U.S. dollar sank by 3.2%, and gold rose by 2.6%. Clearly, Bitcoin from 2009 to 2018, was not a reliable store-of-value.
Verdict: Bitcoin, at this point-in-time, is more of a poker chip than money. However, the rapid acceptance of Bitcoin for payment will support its wide-spread use as money in the years ahead--just not likely in 2018, 2019 or 2020.