Interesting Things People Are Saying About Bitcoin (Part II)

Last week I posted a blog about 5 Interesting Things People Are Saying About Bitcoin. Well, as theories and speculation about Bitcoin continue to make top headlines, here are five more interesting things people are saying as well as a few of my personal opinions.

1) "Whatever It Is, It's Not Money!"
Forbes contributer Steve Forbes claims that Bitcoin is not really money because it has no fixed value, is volatile, and is not transparent. But does any currency really have a fixed value? Isn't the value always relative to what you can do with it? One cannot disagree that the price is currently very volatile, but I don't necessarily think that this makes Bitcoin completely irrelevant. As long as I can use bitcoins to buy some stuff then it certainly seems like real money to me.

2) "Even if it crashes, Bitcoin may make a dent in the financial world"
An article in The Economist compares the impact that Bitcoin may make on the financial world to the impact that Napster made on the music world. The articles states, " Napster and other file-sharing services have forced the music industry to embrace online services such as iTunes or Spotify. Bitcoin’s price may collapse; its users may suddenly switch to another currency. But the chances are that some form of digital money will make a lasting impression on the financial landscape." With potential Bitcoin alternatives out there or being developed (i.e. Ripple), it isn't unreasonable to assume that Bitcoin is just the beginning.

3) "Bitcoin Isn’t the Only Cryptocurrency in Town"
Alternatives currently on the market include litecoins and PPcoin. So why is Bitcoin getting all the attention? Well, for one the value of all the bitcoins in circulation (currently over $1 billion) is over twenty times times higher than the second largest cryptocurrency Litecoin. Still, the point is that Bitcoin does have some competition, and some of the newer currencies may have some advantages over the Bitcoin model that investors should take into consideration. The big question is, will competition help or hurt the overall digital currency market?

4) "Bitcoin Doesn't Have a Deflation Problem"
One of the main arguments against the future success of Bitcoin is that the limited supply will lead to deflation issues. The basic argument is that an expected increase in future demand will lead to an expected increase in future value which will cause people to hoard bitcoins rather than spend them causing a crash. Forbes contributer Timothy B. Lee disagrees making the argument that " if market participants become convinced that 'the price of a bitcoin is on a steady upward trajectory,' they’re not going to hoard their Bitcoins for weeks or months waiting for the price to rise. They’ll bid the price up right away. And that means there will never be a significant period of time where people generally are hoarding their Bitcoins in anticipation of future price rises. In equilibrium everyone who thinks Bitcoin is under-valued already has all the bitcoins he or she is willing to pay for."