The Federal Reserve Bank of St. Louis recently likened Bitcoin to “regular currency.” Bitcoin’s lack of intrinsic value (similar to the U.S. dollar, the Euro, or the Swiss Franc), the limited supply of BTC, and the lack of a middleman (p2p) are all highlighted byat the St. Louis Fed. The three key qualities in which it perceives bitcoin as a regular mainstream currency are discussed below:
1. Zero Intrinsic Value
Economists Aleksander Berentsen and Fabian Schär explained in a recent St. Louis Fed Review article that bitcoin units have no intrinsic value.
Since America left the gold standard for domestic transactions in 1933 and ended international convertibility of the dollar to gold in 1971, our paper money is not backed by any real commodity of value (like gold or silver) and hence it does not have any intrinsic value. The same applies to cryptocurrencies like bitcoin, which make it similar to today’s leading fiat currencies: the U.S. dollar and the euro. These are the only ones to enjoy legal tender.
2. Limited Supply
The Fed’s job is to increase or decrease the distribution of currency notes after they’re printed and it does so depending upon market conditions contrary to the belief that Fed prints money.
Scarcity is one of the most important features of a currency in making it valuable, and therefore money must be in limited supply. As a central bank, the Fed balances the necessary supply of dollars that helps achieve the aim for keeping prices stable and promote employment.
Bitcoin is a decentralized system but it has a limited and stable supply through the mining mechanism. and it allows for a creating of need, similar to the working of a standard fiat currency.
3. No Middlemen Required
There is no middle party involved when it comes to transacting bitcoins. The Bitcoin’s whitepaper states “A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution,”
The St. Louis Fed article says that that owing to its intrinsic nature, bitcoin is similar to a dollar bill, and behaves like a standard fiat currency.
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