A successful currency acts as a medium of exchange, a unit of account, and a store of value, exhibiting characteristics of durability, portability, divisibility, uniformity, and acceptability. Arguably, bitcoin demonstrates all the relevant currency characteristics, albeit that its acceptability for transactions is restricted to the community of users operating the relevant electronic wallet software. This is not unusual among currencies — the US dollar, for example, is accepted as legal tender only among those parties that agree (or are required by legislation) to use it for payments.
However, in the wake of bitcoin’s recent continued volatility, doubt has been cast on its ability to act as a store of value in the long run despite the fact that the current standard deviation of daily returns is not particularly high (compared to its seven years of price history). Nevertheless, the bitcoin/dollar volatility is still considerably higher than the volatility of the gold price (in USD), which in turn is considerably higher than the volatility of the EUR/USD exchange rate.
Read More Here: http://www.aei.org/publication/digging-deep-into-bitcoin/
