BITCOIN AND THE VALUE OF PAPER MONEY

My book Paper Money Messages Volume 1 discusses 21 Countries that have experienced hyperinflation. The value of paper money was maintained by either adding zeros or redefining the denomination. People will accept paper money if they can purchase something else with it. However, the concept that a “piece of paper” can have significant worth is a conundrum. There are other examples of how people will assign value to something that does not have obvious value. An example is the use of bitcoin. Like “paper money,” it is backed purely by the perceived value that the user has assigned to it.

Bitcoin is a digital currency created by an anonymous computer programmer or group of programmers known as Satoshi Nakamoto in 2009. Owners of bitcoins can use various web sites to trade them for physical currencies, such as US dollars or euros, or can exchange them for goods and services from several vendors. The number of vendors that accept bitcoin for some of their products is growing, and includes companies such as Subway, Microsoft, and Dell.  

As quoted by the bitcoin.org on their website in June of 2018. “The price of a bitcoin is determined by supply and demand. When demand for bitcoins increases, the price increases, and when demand falls, the prices fall. “ “Bitcoins have value because they are useful as a form of money. Bitcoin has the characteristics of money (durability, port- ability, fungibility, scarcity, divisibility, and recognizability) based on the properties of mathematics rather than relying on physical properties (like gold and silver) or trust in central authorities (like flat currencies). In short, bitcoin is backed by mathematics. With these attributes all that is required for a form of money to hold value is trust and adoption. In the case of bitcoin, this can be measured by its growing base of users, merchants, and startups. As with all currency, bitcoins value comes only and directly from people willing to accept them as payment.”  

1946 Hungary note for 1 Sextillion Pengo (21 zeros). (Typically Trillion is the largest term that most people are familiar with, however after the trillion there is a Quadrillion, Quintilian, and then Sextillion.)

When the book Paper Money Messages Volume 1 was written the value of bitcoin was about $7,700, which was considered an incredible valuation. However, the value of bitcoin continued to increase after that time until it reached $19,539 in December of 2017. However, doubts about the value of Bitcoin and other cyber currencies (there are many of them besides bitcoin) has caused the value to drop. Currently as of 11/23/18 it is trading for $4,249 (a decrease of 78% from the peak!)  

What is the correct value? This is for the market to determine. What is the most stable money: digital money, government issued money, collectible coins, collectible paper money, or gold/ silver?  

Therefore, as can be seen, there is a direct parallel between the “value” of the bitcoin and the “paper money” that is shown in Paper Money Messages Volume 1. Where do we place “value” is a great thing to consider during this holiday season.

2008 Zimbabwe 100 Trillion Dollar note. The lowest denomination in the series is a one dollar note. In 2006 the lowest denomination was a one cent note!

For more information, see:
https://papermoneymessages.com/

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