Is Bitcoin Money?
I used to invest in stocks. These days, thanks to medical bills, I’m not invested in much of anything, but I still keep tabs on the market. I hope I’ll be able to invest again once I’m done with cancer treatment.
However, there were metrics I used when I was investing in the stock market.
For example, there was a company’s P/E (price-to earnings) ratio. There was also it’s P/B (price-to-book) ratio. Other things I’d look at — its market share and the popularity of its products. The executive team running the company.
None of these are a good way to measure Bitcoin — it has no earnings and no book value. There is no tangible product and no CEO, CFO, or COO.
So why would anyone buy Bitcoin?
Bitcoin is a new type of asset. Some people and even governments have adopted it as a new type of currency. Many think that Bitcoin is superior to other forms of money and will better resist inflation.
Some people think that Bitcoin has changed the global economy in the same way that paper currency changed things when it replaced gold and silver as the means of transaction.
Because Bitcoin is truly novel, it confuses even investment professionals.
However, for those who want to invest in crypto — don’t despair. There is a lot of information available online, and if you put in the time and effort, you can educate yourself. But you have to do the research!
The first thing to grasp — understand how money works and why Bitcoin is a form of money.
What Is Money?
Every time anyone buys or sells anything, they use money.
Does this mean people understand money? Not unless they’ve thought about it. After all, they don’t think about the water they drink or the air they breathe. Unless something goes wrong…
So what is money?
It’s a good, just like any other.
In order to understand it, you don’t need to be a theoretical mathematician. And you don’t need to depend on academics, the media, or the government to tell you how to think about it.