To Understand Bitcoin, We Need to Understand What Money Is

To Understand Bitcoin, We Need to Understand What Money Is

Recently, a popular financial Twitter (or #FinTwit) personality joined the financial TV channel Real Vision and said that “bitcoin is a pretty terrible form of money.” The same day, Fidelity Digital Assets released a report called “Bitcoin First: Why investors need to consider bitcoin separately from other digital assets,” claiming that “Bitcoin is best understood as a monetary good. Bitcoin is likely to be the primary monetary good and another digital asset is not likely to supersede bitcoin in this role.” How can financial experts come to these vastly different conclusions? The answer lies in a misunderstanding of what money is.

This article originally appeared in Crypto for Advisors, CoinDesk’s weekly newsletter defining crypto, digital assets and the future of finance. Sign up here to receive it in your inbox every Thursday.

What is money? It’s one of my favorite questions to ask clients. There is no right or wrong answer, and financial advisors rarely ask this question themselves. The key to understanding bitcoin is learning monetary history and gaining knowledge of digital networks. We’ll focus on deconstructing what money is for the first part of this series.