The price of one bitcoin is currently trading just over $2,000 after a wild week of ups and downs.  It was more ups than downs though.

The price of one bitcoin reached $1,000 at the beginning of 2017.  It went above and below the $1,000 mark a few times.  It was just a couple of months ago that the price of one bitcoin was trading below $1,000.  It has more than doubled in a couple of months.

Of course, when we talk about the price of Bitcoin, we are talking about the price in U.S. dollars.  I have been quick to point out that Bitcoin is not money, as it is not widely desired.  I still challenge anyone to walk into a Walmart or their local grocery store and try to pay with bitcoins.

I understand that there are a few online retailers who will accept Bitcoin, and there are even some charities and institutes that will be more than happy to accept donations in Bitcoin.  But the point is that it is not widely recognized as money.

In the last week, it was easy to hear owners of bitcoins say that their bitcoins are gaining value.  If the price of bitcoins were to fall, would you hear holders of dollars cheer in the fact that their dollars were gaining value?  Do you see the point here.  The only reason that owners of bitcoins are excited is because the per dollar value has increased.  It is still dollars that serve as money, whether you like it or not.  It is dollars that serve as our basis for judgement.

I still do not see Bitcoin serving as a main form of money in the future.  I can understand why someone in Venezuela might want to convert his wealth into Bitcoin.  I would certainly take my chances with Bitcoin over the Venezuelan bolivar.

Bitcoin has some qualities of being a good form of money, but it also has some bad qualities.  It is similar to any fiat currency in the fact that it is basically worthless if not for the fact that it is considered, at least by some, to be a form of money or a potential form of money in the future.

You can’t say the same thing about gold.  Gold is used in jewelry and for some industrial purposes.  Gold has the characteristics of a form of money.  It is why the market chose gold (and to a lesser extent silver) as a form of money thousands of years ago.

This isn’t to say that you can’t make money (U.S. dollars) with Bitcoin as a speculation.  But this doesn’t make it money.  You could have also made money buying stock in Amazon.  This doesn’t make Amazon stock a form of money.

The key here is that you have to convert your speculation back into U.S. dollars to make it useful in most cases.  You can spend your U.S. dollars almost anywhere.

The Bitcoin market isn’t for me right now, but that’s not to say it won’t go higher (in terms of U.S. dollars).  It is a speculation.

I do think Bitcoin is a bubble.  I think the whole idea is a bubble.  I would be very surprised if Bitcoin was worth anything of any significance 20 years from now.  In the long term, I expect gold to beat Bitcoin as a form of money.  Gold has the characteristics of money, and it also has thousands of years of history on its side.

Just to clarify, although Bitcoin is probably a bubble investment, it doesn’t mean it can’t go higher.  It doesn’t mean it can’t go significantly higher before falling.  That is one of the marks of a bubble.  Things go up far beyond what is rational.  It becomes a mania.

I have no opinion on what the price of a bitcoin will be next week or one year from now.  It is a game for gamblers.  I have nothing against gambling if you are taking calculated risks with money you can afford to lose.  I just suggest that you not rationalize your speculation by saying that Bitcoin is the money of the future.