/biz/ - Business & Finance

Bitcoin, like gold, is a Money (store of value), not currency (transactional media). Remember gold has rarely been used as currency (transactional media), poor monies like silver were used instead. The value of Money is derived from demand for Store of Value, Money stores value dispersed within the economy by being something that meets the demand for SoV, as demand for SoV is consistently high, Money will retain value given normal functioning of the economy. BTC is still an immature Money which is why it's still volatile, but the properties of BTC (fixed supply, weightless, no holding cost, etc) make it a superior Money to the natural monies, and as network effect is huge in Money (Perfect money has universal acceptance, larger network = closer approximation to perfect money = more value) BTC, being the first of the successful synthetic Monies, will continue to cannibalize the SoV market.

>doesn't do anything
Functional demand is DETRIMENTAL to a money, price is a product of aggregate demand, a money having functional use means part of the price (proportional to it's functional demand) will be from functional demand, forcing buyers of Store of Value to pay a functional premium and subjecting them to the risk the functional demand will fall, causing real terms fall in money value independent of demand for Store of Value. This can be seen in platinum, while it's physical properties make it a strong money on paper, it's high functional demand renders it unusable as price becomes dominated by functional demand, not Store of Value demand. Gold is the best natural money precisely because it has little functional demand, BTC improves on this by having no functional use outside of Money.