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Rejecting Fiat – the Electronic vs Physical Edition

It’s been virtually impossible to avoid discussions about Bitcoin in recent days as the electronic currency soars from $150 to over $900 in recent weeks.   The parabolic surge is breathtaking to say the least:



But what I find more interesting about Bitcoin is that its huge rise is occurring at the same time that gold continues to move lower.  Gold is now down 23%+ this year as Bitcoin has jumped from $14 to $900 (you do the math on that!).

Of course, Bitcoin and gold are both considered alternative forms of money to fiat money.  But there’s a big difference between gold and Bitcoins, in my opinion.  Gold is a very poor medium of exchange because of its physical properties.  This makes it a rather poor form of money, especially in a fast paced electronic economic system.  But Bitcoin is different.  Bitcoin has the potential to be every bit as good a medium of exchange as any other electronic form of money.  It just needs to start getting accepted as a form of final payment by more and more merchants.

So the interesting thing about this rally in Bitcoin is not that Bitcoin is rallying, but that it’s occurring at a time when gold is collapsing.  I can’t help but wonder if this is a sign of the anti-fiat money crowd voting with their wallets on the potential that gold really isn’t a viable form of future money while something like Bitcoin might just be….

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