Bitcoin: Good Investment or Medium of Exchange?

Updated on January 17th, 2022

In recent years, there has been a lot of interest in Bitcoin.

As a digital currency in a world that values all things technology, it’s not surprising that Bitcoin is making waves. But there are questions about whether or not it makes a good investment.

What’s most interesting about Bitcoin, however, is its potential as a medium of exchange.

Bitcoin: Investment or Speculation?

Investors have been looking at Bitcoin for some time now, thanks in large part to the headlines made a few years ago when a single Bitcoin was “worth” close to $1,000.

It’s possible to trade for Bitcoin on the various exchanges set up, and today Bitcoin is worth right around $775.

If blockchain continues to rise in popularity, some investors think that the price of Bitcoin could continue to rise. This is especially true since the creators of the digital currency claim they will create only a limited supply.

On the other hand, others wonder if Bitcoin is more of a speculative situation. Could investing in Bitcoin be equivalent to the tulip bulb craze that ended in disaster in 1630s Holland?

That’s the question that many investors have to ask themselves. Are they investing or speculating?

Before you buy Bitcoin as an investment that you add to your portfolio, it’s a good idea to do the research and see if it makes sense for you. Just because something is doing very well doesn’t mean it’s a good idea for you.

Bitcoin as a Medium of Exchange

Many true Bitcoin enthusiasts actually prefer to use Bitcoin as a medium of exchange. They aren’t interested in investment or speculation or trying to sell at a profit. Instead, they see Bitcoin as a

Instead, they see Bitcoin as a way to engage in free association of trade without the need for governments to regulate the exchange. With Bitcoin, it’s possible to pay for goods and services instantly by transferring the digital money straight from your wallet to someone else’s digital wallet.

On top of that, there is no exchange rate to worry about, and you can do business globally. One of the top draws for those who like using Bitcoin as a medium of exchange is that you don’t have to wait for funds to be converted from one currency to another — and you don’t lose money to currency conversion fees.

Right now, it can be a little challenging to try to make things work with Bitcoin as a medium of exchange, though. After all, the changes in its value mean that purchase prices change, especially if Bitcoin is used as an alternative to paying in U.S. dollars.

Consider, if you use Bitcoin at a store that charges $50 for something, you have to convert that into Bitcoin if it’s one of the payment options. Today, if you assume one Bitcoin to be worth $775, you’re going to pay only a small portion of a Bitcoin. However, if the value rockets higher, you will need to pay a larger portion of a Bitcoin for the same item.

As a medium of exchange, today Bitcoin works best when doing business with others who prefer to negotiate in Bitcoins, rather than using the digital currency as an alternative for something already priced in a state-sponsored currency.

In the end, how you use Bitcoin is up to you. It offers interesting possibilities for trade on a global basis, and the investment opportunities might be worth considering as well.

Miranda Marquit

Miranda Marquit

I'm Miranda and I'm a freelance financial journalist and money expert. My specialties are investing, small business/entrepreneurship and personal finance. The journey to business success and financial freedom is best undertaken with fellow travelers.

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