Currency is typically defined as a system of money in general use in a particular country. This is the case in most countries today. Historically, periods of exceptional turmoil or circumstances, such as WW II, have given rise to reversions to barter and tangible substitutes for currency. In some instances, even today, individuals have sought to transfer wealth using gold or diamonds.
Examples of tangible, non-currencies becoming generally accepted for transactions abound. During WW II, cigarettes, chocolate and silk stockings were widely accepted. Until recently, one of the most accepted prison currencies was cigarettes.
Promoters of Bitcoin like to think that crypto will become an accepted currency. This is unlikely to happen until crypto is accepted as wages. How else would most individuals have crypto to use as currency? As for crypto as a store of value, it should be noted that during periods of political unrest, electricity is often one of the first public services to disappear or become unreliable. How does that work for crypto based transactions?
Investors considering the addition of crypto to their portfolios should have a clear view of the purpose of the purchase. A store of value, currency for day-to-day transactions, capital appreciation, or just FOMO (fear of missing out)?
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA®