Currency Cheatsheet

US Dollar

Fiat currency

This is a type of money created by a government whose value comes from declaration– fiat means "let it be done" in Latin. It is regulated by the government to ensure stability.

Other Examples

Euros (European Union), Pounds (UK), Francs (Switzerland), Yuans (China), Yen (Japan)

Commodity currency

This type of money is useful in itself as well as as a currency. Gold is a material that used in many things from jewelry to technology. Market demand (if people are interested in buying and selling) drives its value.

Other Examples

silver, copper, salt, cigarettes, candy, barley


The newest type, this entirely digital money has transactions and quantities secured through cryptography. The value of the money is created through market demand.

Other Examples

Litecoin, Peercoin, Ripple, Zerocoin, Dogecoin

Since 1785

The original US financial system was constructed by Alexander Hamilton and had bills called Continentals. Continentals suffered a severe reduction in value during the Revolutionary War due to too many bills being printed. Congress issued the replacement currency, the dollar, on August 8, 1785. To ensure faith in its value, this new currency was backed by silver and gold- meaning that each dollar matched an existing quantity of either metal. This worked until the discovery of a large natural silver deposit in the western US which caused a global silver devaluation. In 1900 Congress passed the Gold Standard Act which tied the dollar only to gold. During World War I, US companies that held debts to European companies made payments with gold. This transfer changed gold's global value and destabilized the exchange rate of the dollar, which led to the country removing the gold standard.

Since the Bronze Age

The Bronze Age (3300-1200BC) marks man's first use of bronze and other metals including gold. Gold's beauty made it a valuable metal used in trading. Gold coins were first used in Persia in the 7th century B.C. While today gold no longer backs any national currency, it remains a commodity traded on the market with a shifting price due to market fluctuations. It tends to perform well when confidence in a fiat currency drops.

Since 2008

Digital currencies have been tried a few times since the spread of the internet in the 1990s. eCash, founded in 1989, failed due to reliance on government network infrastructure and a lack of merchant acceptance. The majority of businesses and consumers favored using credit cards. Bitcoin was invented in the wake of the 2008 US financial crisis by a person or group under the pseudonym Satoshi Nakamoto. It was introduced as open source software in 2009 and was the first fully implemented cryptocurrency. Its infrastructure makes it possible to conduct financial transactions without banks. Transaction volume in bitcoin began growing in 2013, with mainstream businesses and websites accepting it as payment.

Ordered by the Federal Reserve, minted by the US Treasury

To meet public's need of cash at ATMs and banks, the Federal Reserve puts up collateral in the form of its assets (gold certificates and government IOUs) and orders the US Treasury to mint new bills and coins. The new money is then given to Federal Reserve Banks. Commercial banks get new money from a Federal Reserve Bank in their district and pay for it by drawing down their reserve accounts. There is currently $1.34 trillion in circulation.

Extracted from rocks

Most gold is produced through hard rock mining where the earth is dug, crushed, and the gold separated through treatments with cyanide and electrical current.

Panned from streams

Panning (also known as placer mining) is used where gold has collected in stream beds. Miners find the gold by hand or through machine sluicing and dredging. Around 166,600 tons have been mined, with 52,000 tons still in the Earth.

Awarded through solving math problems

Bitcoin miners are people who have downloaded bitcoin's free ledger software onto their computer and then compete to find solutions to cryptographic math problems which rewards them with bitcoins. The process secures the system by verifying transactions and forms the "blockchain" which is the linear, permanent, irreversible ledger to which all participants are synced. Anyone with the right hardware and software can be a miner and all transactions are publicly recorded and visible at The designers of bitcoin have programmed a finite amount of the coin (21 million in total) to be awarded to prevent devaluation due to excessive supply. Over 14 million Bitcoins have been mined.

The Federal Reserve

The Fed was created in 1913 in response to a period of dollar weakness. Its tasks are to ensure the strength and stability of the dollar, to serve as the central bank of the US, to regulate banks and to manage the nation's money supply. It is comprised of a board of directors chosen by private banks and a board of governors selected by the US president, all of whom work together to make policy decisions. The current chairman is Janet Yellen. Critics see a conflict of interest in the system which allows private banks to influence their own regulation, and point to the 2008 financial crisis, corporate bank bailouts and a continued policy of secrecy as concerns.

The SEC (Securities And Exchange Commission) and the CFTC (Commodity Futures Trading Commission)

Markets which sell gold financial products (like gold certificates) have oversight from these two agencies which work to ensure proper information is given to investors and traders so they can make sound decisions. The agencies also work to prevent fraud. The SEC was created in 1934 and the CFTC in 1974. They are both comprised of a group of 5 commissioners, with one selected by the president as chairman. The current SEC chairman is Mary Jo White and the current CFTC chairman is Timothy Massad. While the SEC and the CFTC work to monitor the gold market, they do not regulate the brokerage firms and exchanges involved; those are self-regulated by the organizations they join.

No one

Bitcoin was designed to have no one body running or regulating its system. Because the computational power needed to secure the system is aggregated from independent miners, there is no need for the infrastructure of a single party to maintain it. This is why bitcoin is described as a ‘decentralized’ currency.

User majority

While the software self regulates production of new coins, regulation of the entire system is based on user majority. Changes are difficult as they have to be approved by many users before they are implemented.

Central banks and governments

As a result of its increased use, the US government is examining ways to prevent misuse and fraud. In 2013 the US GAO (Government Accountability Office) called for oversight for bitcoin and recommended the IRS create tax guidance around virtual currencies. The result was the IRS declaring bitcoin to be treated as property. Other regulations are still being formed. Abroad, regulation is in its infancy. Europe has advised banks not to deal in virtual currency until ordinance has been formed and in China it was deemed illegal for commercial banks to trade in bitcoin (though trading by individuals is still legal).

Official currency of the USA, standard unit for global commodities

The US dollar is the official currency of the USA and Ecuador, East Timor, El Salvador, the Marshall Islands, Micronesia, Palau, Turks and Caicos, the British Virgin Islands and Zimbabwe. It is also a standard unit of currency for global commodity markets like gold and oil.

Reserve currency

American businesses and households hold 15% of the currency. The other 85% is unknown but is likely held as offshore stockpiles and in international reserves. Countries who have unstable financial systems hold US dollars for use in international transactions and also use it to back their own system in the event of a crisis. The US dollar is the most used reserve currency. Others include the Euro, British Pound and Japanese Yen.

Investment vehicle, reserve, and to back a currency

Gold is traded on the commodity market and is used as an investment. When gold is kept by a nation’s central bank reserve, it is used as collateral to guarantee debts. It can also be used to back a currency in a program called the gold standard. In this system, money is tied to a specific amount of gold and can be exchanged for it. While historically many countries (including the US) were on the gold standard, currently no country uses it. The US Treasury currently holds 261.5 million troy ounces of gold, valued at $434.6 billion.

Physical forms

Fifty percent of all gold in existence is used in jewelry. The rest is used in gold bars & coins (19%), used in central bank reserves (17%) and used in industrial products like cell phones (12%). Two percent is unaccounted for.

Alternative currency

Bitcoin is used as a currency in places that accept it. Companies accepting bitcoins include, Expedia, Dell and OKCupid.

Transaction and data infrastructure

Companies have formed to use the blockchain infrastructure to secure transactions, certify contracts and exchange foreign currencies.

Investment vehicle

Bitcoin's price volatility makes it attractive to market traders looking to profit off of its highs and lows.

Through serial numbers and individual bank ledgers

All US dollars are marked with serial numbers which allow for it to be tracked. Dollars arrive to banks in sequential order. Banks suspecting illegal activity will further mark the bills with a highlighter or writing. Money flow to and from one's bank account is recorded in the ledger of that particular bank.

The LBMA (London Bullion Market Association)

One of the costs associated with owning gold is verifying authenticity through by testing for purity, called assaying. One way to get around this fee is to obtain it from a system that has already verified its chain of ownership. Physical gold that is bought and traded within the London Bullion Market is verified from refiner to dealer to owner and is stored gold in approved vaults. Gold stored at home or outside the chain must be re-assayed before it is let back into the system. This verification allows for expedited transactions.

The Blockchain

The blockchain verification log is the ledger which records all transactions in its system. Within it you can find every transaction that has ever been completed with the currency. It is a collaborative log contributed to by independent miners who have downloaded the bitcoin software and use it to solve the math problems that encrypt transactions. Successful solving of transactions rewards the miners with new bitcoins. This infrastructure prevents fraud as many independent verifications are needed to approve transactions.

By paycheck

US dollars can be obtained by working for an American company.

Through banks

Banks exchange dollars for other currencies during business hours.

Through a sale

Dollars can be obtained by selling an item to someone paying with dollars.

Through an exchange

Financial products based on the dollar (such as stocks, mutual funds, hedge funds, index funds and ETFs) can be obtained through exchanges like the New York Stock Exchange (NYSE) & NASDAQ.

Through an exchange

The main center for transactions, the LBMA in London trades around the clock, with the price for gold set at 10:30am and 3pm GMT. There are also exchanges in New York, Denver, Sydney, Hong Kong, Shanghai and Zurich Switzerland.

At a jewelry store

The majority of the people that own gold have it in the form of jewelry.

Through an exchange

Bitcoins are bought and sold through online exchanges. Unlike American stock exchanges, they do not close there is no daily closing price for the price of bitcoin. Coinbase is currently the largest exchange.

Bitcoin ATM

There are a growing number of bitcoin ATMs that convert cash to bitcoin.

Other bitcoin users

People can trade bitcoins for cash without using an exchange through meeting up with people locally and obtaining the coin's private key on a piece of paper.


The US Government charges taxes on earnings via the Internal Revenue Service. This includes earnings from normal pay, bank interest and stock market gains.

Bank fees

There are numerous fees charged to consumers by banks, including: - Monthly or annual service fee - Membership fees - Minimum balance fee - Foreign exchange fee - Foreign transaction fee - Penalties on overdrafts - Drawing from a savings account too often - Lost card fee - Paper statement fee - ATM fee - Human teller fee - Early account closure fee - Returned deposit fee (getting a bad check)

Credit card fees

Consumers pay interest on a carried balance, and fees for late payments. Some credit cards also change an annual membership fee. Vendors pay a fee per credit card transaction, usually between 2 and 3 percent. Vendors typically pass transaction costs to their customers by raising their prices.

Fees for holding and exchanging gold

- Paying a dealer premium beyond the cost of gold - Shipping fee - Assaying (testing for purity) - Vault storage fees - Insurance for gold kept in a safe deposit box - Insurance for home storage - Taxes on capital gains

Commissions on gold ETFs

An ETF (Exchange Traded Fund) is an investment traded on the market like a stock. Fees include: - Commissions on buying selling - Expense ratio fee (a recurring annual fee to cover its management)

Commission fees

Commission fees are paid to exchanges when converting fiat money to bitcoin. Coinbase, the largest exchange, charges 1% of the transaction.

Bank fees

Bank fees are paid to the bank transferring dollars to the bitcoin exchange. The fee is usually 15¢.

Miner fees

Miner fees are optional but are an incentive to speed up the transaction verification process (the inclusion into the blockchain). People opting out of paying a miner fee will see their transaction clearing in a significantly longer time (in a test it took 12 hours paying no fee versus 10 minutes with a fee). Fees are related to the technical transaction size, not the monetary size. The more the system must work to patch together parts of original bitcoins to create the total, the greater the transaction size. It is possible for a $250 transaction to have a lower fee than a $19.95 transaction.

Fees are paid by the spender, not the vendor

Unlike in PayPal or credit card processing, the person buying pays the fees on the transaction. This makes it an attractive option for vendors. A randomly picked transaction from totaling 0.34522894 bitcoin ($123.19) had a fee paid by the person buying of .0001 bitcoin (4¢). The same transaction made through PayPal would cost the vendor $4.46. Another transaction shows the same miner fee of .0001 Bitcoin (4¢) on a 37.9362385 bitcoin purchase ($13,543.62). Made through PayPal that same transaction would cost the vendor $474.18. While the vendors do not pay a fee per transaction, they will pay a commission fee when they exchange their earned bitcoins for dollars (1%).
Pounds Sterling £1 = $1.54
Euros €1 = $1.12
Japanese Yen ¥1 = $0.0084
Chinese Yuan ¥1 = $0.16
Dollars 1 Troy Ounce = $1,213.17
Dollars ฿1 = $249.05
Electricity ฿1 = $597.23 (June 2014)

Supply & demand

Exporting products and services creates demand for the US dollar because foreign customers need to pay using it. Foreign purchases of US stocks need to be bought in dollars as well. More demand equals greater value.

Psychology & sentiment

When consumers stop spending due to unemployment, the economy weakens and pessimism spreads to foreigners who sell their US-backed bonds and stocks back to their local currency.

Economic measurements

The Federal Reserve publishes reports and uses them to direct monetary policy that controls the dollar's value. Reports include data on US employment, consumer finances and industrial production.

Supply & demand

Gold is traded on a market and is thus influenced by trading volume and supply & demand.

Psychology & sentiment

The price of gold often has an inverse correlation with the dollar and the stock market as a whole. When the economy is perceived to be weaker, gold is seen as a more reliable store of value.

Commodity value

Gold's use in products like jewelry and technology make it reactive to consumer demand, which is influenced by larger economic factors like unemployment. People buy less gold when they are unemployed.

Supply & demand

The price of bitcoin is influenced by market fluctuations which are caused by exchange activity. Using bitcoin as an investment (holding and exchanging coins in large quantities until a profit is made) increases price volatility. Using bitcoin as a currency promotes stability as it ensures a consistent small scale flow of money.

Psychology & sentiment

The main cause of value for any currency is the collective agreement that it has worth. A high bitcoin price gives the impression of stability whereas a period of loss weakens the faith in value.

Business adoption

Bitcoin being accepted by businesses for normal transactions creates the perception of worth. The ability to use it to buy lunch, pay bills, or buy a car strengthens collective belief.

Bank savings account

A savings account with a bank allows a customer to save money with interest returned. The interest is typically very low- under 1% but the money is insured by the FDIC and is available for immediate withdrawal.

CDs (Certificates of Deposit)

Similar to a savings account, a CD is insured and has a fixed interest rate slightly higher than a savings account. It differs in that the money must stay in the account for a fixed amount of time.

Money Market Account

MMAs are similar to a savings account but allow for the ability to withdraw from the account if a minimum balance is met.

Stock market

The stock market is a place to buy and sell ownership shares of companies. Return rates average 7% over the long run across the entire market but are not guaranteed.

Mutual fund

Mutual funds are a professionally managed product that allows the investment in a group of stocks. Investors use this so they don't have to monitor and manage a collection of stocks themselves.

Index fund

An Index fund combines a similar group of stocks into one fund that is managed by a computer instead of a person, lowering fees. The index model uses statistics to decide which stocks are included and are grouped by market sectors (such as NASDAQ).

ETFs (Exchange Traded Funds)

Traded on stock exchanges, ETFs are comprised of a collection of stocks, commodities or bonds that act similar to an index fund but require less selling of its components and therefore have lower fees.

Hedge funds

These are funds that are not available publicly and use risky short term investment methods to maximize profit for their investors. They are typically only used by high-net-worth individuals and are structured to avoid government regulation.
People tend to invest in gold more during periods of economic weakness. Its day-to-day price volatility make it appealing to those wanting to profit off of its fluctuations.


Bulk gold in the form of bars and coins. The word comes from the French word for 'boiling' (bouillon) which was the historic term for melting houses.


Similar to bullion bars, gold coins are a store of value and not meant for use as currency. Their small size makes them easier to store and distribute.

Gold ETFs

These funds are traded on the stock market like stock ETFs and allow an investor to have exposure to the price of gold without needing to manage storage and other fees. Investors are able to sell their shares to other investors or back to the ETF.

Gold certificates

Offered by banks, allocated certificates represent an ownership to an actual amount of gold without the owner needing to store or insure it. Unallocated certificates are a form of fractional reserve banking (selling ownership without having the gold on hand) and do not assure an equal exchange in the event of many people exchanging at the same time (called a run).

Gold derivatives

Derivatives are contracts that derive their value from the fluctuating price of gold and include forwards, options and futures. They are used to hedge against loss by investing in a contrary position.

Stock in mining companies

Rather than invest in gold itself, an investor can buy shares of a publicly traded mining company. As the gold price rises, so does the profit of the mining company which equates to an increase in stock price.
Because it is traded on a market and has a constantly changing price, bitcoin has attracted investors and companies offering financial products similar to gold.

Buying and exchanging bitcoins

Bitcoin's price is volatile and can fluctuate up to $50 a day, making it a profitable investment. Tax wise it is treated similar to the stock market with short term capital gains tax applied to exchanges made under a year.

Bitcoin ETF (proposed)

There have been several bitcoin ETFs that have filed for SEC approval, all of which are pending. The ETF will allow people to invest in bitcoin without needing to buy, store or safekeep it.

Bitcoin derivatives

As with other commodities with fluctuating daily prices, companies are creating financial products like futures that get their value from price volatility.

Physical theft


Counterfeiting involves creating imitation currency. It is estimated that 1 in 10,000 notes are counterfeit.

Identity theft

Identity theft happens when thieves use sensitive personally identifiable information of their victims (such as name, address, phone numbers and social security numbers) to open credit cards or access and drain current bank accounts.

Ponzi schemes

Also known as pyramid schemes, these investments pay old investors returns with the money from new investors, rather than from actual profit. The largest Ponzi scheme ever executed was the Bernie Madoff scandal of 2008, with investors losing $40 billion in the 30 year-long fraud.

Internet fraud

Hackers running fake websites ask users for private information that allows them to access their bank accounts (called phishing).

Fraudulent company accounting

Dishonest companies change the numbers in their bookkeeping or set up shell companies (companies with no product, value, or profit) to filter money to falsely alter company profits. An example of this fraud is the Enron scandal of 2001.

Investor fraud

Stock market brokers use several illegal techniques to time the market to their benefit. Front running is buying personal shares of a stock right before a large client purchase that positively affects the market price, then selling their personal shares for a profit immediately after. Insider trading is using company information that is not accessible to all investors to buy or sell on the stock market at an opportune moment.

Physical theft


Gold coins and bars and sold as solid gold could be a less valuable metal that is gold plated. These metals often weigh the same as gold and dupe those that do not get the proper metallurgic tests.

Cash for gold

Because gold does not have a global ledger authenticating ownership, stolen property can be processed through these companies.

High Yield Investment Programs (HYIPs)

An investment guaranteeing large returns on the gold market, these are often times Ponzi schemes.

Shares in fraudulent mining companies

These companies either do not hold the large gold reserve that they advertise or do not have the potential for finding new gold. An example of this was the 1997 Bre-X scandal.

Digital theft

Taking control of a coin's private key allows a thief to spend or transfer bitcoins that are not theirs.

Ponzi schemes

Where there is market volatility and opportunity for investment, there is an environment for pyramid fraud. This is no different for bitcoin. A recent example involved a scheme where a man bought bitcoins for investors, returning 7% weekly interest. In reality he paid older investor's returns with new investor's money.

Hacking coins

Thieves stole 850,000 bitcoins through security glitches in the Mt. Gox exchange collapse in 2014. 200,000 coins have been recovered since.

Hacking CPU power

Because mining bitcoins requires a great deal of computing power and electricity, hackers have found a way to access cloud accounts (like Amazon Web Services) to use the servers for mining, running up hundreds of thousands of dollars of charges.

Old notes and coins are destroyed

Notes in poor condition are collected by banks, sent to their district Federal Reserve Bank and shredded (about 7,000 tons per year). Worn coins are collected and then used in the minting of new coins.

Loss to technological uses

Gold used in technologies like cell phones is in such small quantities that it does not get recycled and is lost when the technology is discarded.

Lost bitcoins

Public and private keys of a bitcoin are needed to complete a transaction and if those keys are lost through hard drive destruction, the bitcoin is unusable and permanently out of circulation.

Top ten people

1. Bill Gates $81.9 billion 2. Carlos Slim $78.9 billion 3. Warren Buffet $72.9 billion 4. Amancio Ortega $62 billion 5. Larry Ellison $52.9 billion 6. Charles Koch $42.8 billion 7. David Koch $42.8 billion 8. Christy Walton & family $42.2 billion 9. Jim Walton $41.2 billion 10. Alice Walton $39.7 billion

Top ten companies (public, by market cap)

1. Apple $603 billion 2. Exxon Mobil $401 billion 3. Microsoft $382 billion 4. Google $362 billion 5. Berkshire Hathaway $340 billion 6. Johnson & Johnson $301 billion 7. Wells Fargo $271 billion 8. General Electric $257 billion 9. Novartis $255 billion 10. Hoffmann-La Roche $255 billion

Top ten countries

1. United States $17.4 trillion 22.4% 2. China $10.3 trillion 13.3% 3. Japan $4.7 trillion 6.1% 4. Germany $3.8 trillion 4.9% 5. France $2.9 trillion 3.7% 6. United Kingdom $2.8 trillion 3.7% 7. Brazil $2.2 trillion 2.9% 8. Italy $2.1 trillion 2.7% 9. Russia $2 trillion 2.7% 10. India $2 trillion 2.6%

Top ten

1. SPDR Gold Shares (ETF) 1,239 tons 2. ETF Securities Gold Funds (ETF) 259.79 tons 3. ZKB Physical Gold (ETF) 195.53 tons 4. COMEX Gold Trust (ETF) 137.61 tons 5. Julius Baer Physical Gold Fund (ETF) 93.50 tons 6. Central Fund of Canada (CEF- closed ended fund) 52.71 tons 7. NewGold ETF (ETF) 47.75 tons 8. Sprott Physical Gold Trust (CEF) 32.27 tons 9. ETFS Physical Swiss Gold Shares (ETF) 27.97 tons 10. Bullionvault 37.1 tons

Top countries

1. USA : 8,133.50 tons 2. Germany 3,384.20 tons 3. International Monetary Fund 2,814.00 tons 4. Italy 2.451.80 tons 5. France 2,435.40 tons 6. Russia 1,149.80 tons 7. China 1,054.10 tons 8. Switzerland 1,040.00 tons 9. Japan 765.20 tons 10. Netherlands 612.50 tons

Top holder

Satoshi Nakamoto, Bitcoin's unidentified inventor who is thought to have mined 1 million Bitcoins during the currency's first year and is spread across many wallets. Cameron and Tyler Winklevoss have reported to own around 120,000 (around 1%).

Top country

The US government gained ownership of the single largest Bitcoin wallet on the internet with the FBI's confiscation of the assets of the illicit Silk Road website. It owns 174,000 Bitcoins.

Is a hard currency

The dollar is a hard currency (also called safe-haven or strong currency) which is one used globally and seen as a stable source of value. The dollar has maintained its hard currency status for most of its history.

Is the world's top reserve currency

The dollar makes up 66% of the world's central bank foreign currency reserves, which reinforces its strength.

Is regulated by a governing body

Measures put in place by the Federal Reserve stimulate consumer spending, which in turn strengthens the economy and dollar value.

Is physical

A government can’t recklessly create new gold at will, which is a main cause of inflation.

Is driven by global market forces

Because no government agency is responsible for gold's value, it is not susceptible to perceived value loss due to political activities like war.

Has long term price stability

Gold has a history of maintaining its value over the long term.

Is useful for risk diversification

People buy gold in addition to their other investments to vary their market exposure. In a period of slow economic growth, gold’s value tends to rise.

Is decentralized and trust-less

Because the computational power needed to secure the system is provided by independent miners, there is no need for the infrastructure of a single company or other body to maintain it. This is why bitcoin is described as a "decentralized" currency. The fact that you don't have to trust any one person, miner, or computer in the network means that it is "trust-less".

Is secure

Because many computers in the system are required to verify transactions, it is difficult to fraud the system.

Low fees and fast transactions

The average transaction fee is .0001 bitcoins, or about 3¢, to send money to anyone, anywhere. Transactions take about 10 minutes to be verified by the network. This is cheaper and faster than using a traditional bank, who might charge a fee of $10 and take a week to clear.

Obscures identities

Even though all transactions are public, the only identifiable information attached to each transaction are the wallet addresses of the sender and receiver. Names and addresses are obscured.

Is regulated by the government

This is both an advantage and a disadvantage. Regulations (or lack thereof) can have a negative impact, such as what led to the 2008 mortgage crisis. Because monetary policy is decided by the Federal Reserve, who itself is comprised of private banks, it is possible that some of the policies are biased towards strengthening banks' profits.

Has slow electronic transfers and inconsistent networks

Banks have a slow system for clearing electronic transfers. They currently use a single body called an Automated Clearing House (ACH), which takes days to process transactions.

Is often counterfeited

The dollar's strength makes it heavily counterfeited.

Is physical

Gold is inconvenient to store and expensive to protect from theft, requiring owners to spend up to 1 percent of the gold's value per year on storage and insurance.

Can be counterfeited

Thieves counterfeit gold by using a less valuable yet same weight material as a base and gold plating it.

Has price instability

In the short term, gold's price fluctuates based on day to day market activity.

Is volatile

The price of bitcoin fluctuates by the second, with exchanges never closing.

Is expensive to mine

The system hinges on independent miners verifying the system but requires a great deal of electricity to do so. This makes mining costly in places without cheap electricity.

The IRS treats it as a commodity

Current regulations treat bitcoin as a commodity –not a currency– which makes using it for daily transactions more complicated for the owner's taxes. It is also subject to short term capital gains tax which further discourages use as a currency.

Chargebacks are impossible

All bitcoin transactions are irreversible, making chargebacks impossible for people who have made a mistake or engaged in a transaction with someone untrustworthy.

Its long-term viability is unknown

Bitcoin is only 6 years old and while modeled on gold, it is still a new form of currency. Some economists feel that in the long term bitcoin's fixed quantity will cause a deflationary spiral (massive price increase due to fixed supply) that will undermine the currency.