Whether it’s defaulting to preparing the same half-dozen dinner recipes, always taking the same travel route, or preferring traditional hyms and liturgy at religious services, humans tend to be creatures of habit.
Of course, there will always be the minority who revel in being the first to try out novel communications technologies … adopt the newest fashions … or take advantage of the latest investment schemes.
But most people would prefer to hold back and let someone else take the plunge first.
That’s precisely where things stand at the moment with the Bitcoin alternative currency. The “virtual currency” has been around long enough so that it’s now getting coverage in the “popular” press … and there are even a few folks who have begun using it as an alternative to established currencies.
Indeed, for the past year now, a few national retailers and chain foodservice establishments have been accepting payments in Bitcoin currency.
But a just-released survey that queried consumer attitudes about the new-fangled currency – referred to as a “crypto-currency” by some – underscores how steep a climb the Bitcoin has before it can ever be considered a viable alternative to the Dollar or other established currencies.
TheStreet, a digital financial media company, commissioned the survey which was conducted in January 2014 by GfK Custom Research North America’s OMNITEL unit A total of 1,005 telephone surveys were conducted with Americans age 18 or older.
Let’s start out with the most basic finding from the survey: Three out of four respondents aren’t even familiar with the Bitcoin term.
So right off the bat, that’s a major hurdle. The Bitcoin may have been the subject of numerous press stories and broadcast reports, but the news hasn’t seeped into the larger market consciousness to any great extent.
Next … even after the concept of the Bitcoin was described to them, the survey respondents remained distinctly chilly to the idea:
- Nearly 80% would “never consider” using an alternative form of currency like the Bitcoin.
- ~80% would rather own gold than Bitcoin currency.
Did the survey uncover different attitudes based on the age of the respondents? Yes – to a degree:
- Just under one-third of young respondents (age 18 to 24) would consider using an alternative form of currency like the Bitcoin … versus only about one in ten seniors (over age 65).
- ~15% of the young respondents would prefer to own Bitcoin over gold … versus only ~4% of seniors.
- ~57% of young respondents feel that Bitcoin currency helps the global economy … while just ~14% of senior feel the same way.
The main takeaway from the GfK/OMNITEL research? Bitcoin proponents are going to have to keep plugging away for a good long time before positive public perceptions of an alternative currency take hold — including needing to focus on the most basic educational elements.
Considering the level of financial literacy out there … good luck with that effort.
If any readers have ever used Bitcoin as a currency and would care to comment on their experience pro or con, please share your thoughts here.
2 thoughts on “Bitcoin currency: You’ve got a long way to go, baby.”
I have never used Bitcoin, and have no plans to do so, but here is my two U.S. cents’ (currently, 0.0000547 bitcoins) worth on the topic.
Bitcoin, like any other currency, is a medium of exchange and a value store; so Bitcoin’s real value depends on the basket of goods and services it can buy now, and whether or not people think the size of that basket will grow or shrink in the future. Relative to the U.S. Dollar, despite the fact that bitcoin’s value has fallen by over 60% in the past 3 months, it has risen by 6,330% during the past 2 years — which, along with its extraordinary volatility and Tuesday’s rumored failure of Mt.Gox, a prominent Bitcoin exchange, explains the widespread coverage the currency is currently getting in the popular press.
By comparison, gold’s value has fallen 24% over the same period of time.
People who use U.S. Dollars can pretty much count on their value falling 1% to 2% every year, as measured by the Consumer Price Index. But the U.S. Dollar is different from Bitcoin and gold because, like almost every other government-backed currency on Earth, its supply relative to what it can buy is determined by central bank decree. In this respect so-called “fiat” currencies are actually even more “virtual” than Bitcoin.
Gold and Bitcoins, on the other hand, are “mined” in the private sector. For gold, this means digging up vast piles of rock to search for ore, and processing the ore, to the tune of about 1,200 U.S. Dollars per ounce. If the value of gold (currently 1,320 U.S. Dollars per ounce) were to drop below its production cost, mining becomes unprofitable and one would expect the supply of gold to stabilize.
Bitcoins are also “mined” by running specialized computers 24 hours per day, which consumes electrical power costing roughly 325 U.S. Dollars for each new Bitcoin. Like gold, if Bitcoin’s value (currently 366 U.S. Dollars per bitcoin) were to drop below its production cost, the supply of Bitcoins can also be expected to stabilize.
Bitcoin differs from gold in another important respect: As the supply of Bitcoins grows, the mathematical difficulty of “mining” the next new coin (and hence the production cost) increases. Also, the algorithm by which Bitcoins are produced is designed to cap the ultimate supply at 21 million coins. Consequently one can expect the supply of Bitcoins to grow ever more slowly in the future, and to cease growing completely once the cap is reached.
By contrast, no one really knows how much gold is out there for the taking; and the sky is the limit for “fiat” currencies, as horror stores like the Zimbabwean Dollar early this century, and German Deutschmark in the 1920s, attest.
This leads me to conclude that Bitcoin, though it might be a great value store someday like gold, is doomed by design as an everyday medium of exchange. If you own Bitcoins, and you think the basket of goods and services they can buy will grow ever larger, you would be foolish to spend them on your groceries now. You’d be much better off using your U.S. Dollars to buy the groceries you need, and invest your spare U.S. Dollars in Bitcoin.
Perhaps those Americans who OMNITEL surveyed aren’t as financially illiterate as we suspect …
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