Never mind that dodgy Bitcoin exchanges can disappear in a nanosecond, taking peoples' Bitcoins with them. Never mind that the government can seize Bitcoins when they bust illegal marketplaces such as Silk Road, that Bitcoins can be stolen just like anything else or that some exchanges seem to exist primarily to "sell schmucks to wolves," as Felix Salmon of Reuters puts it.
There's always another such exchange coming, right around the corner.
The value of Bitcoin rises and falls, but the rush of gold bugs into the virtual currency has it going up right now, with the last trade at Bitcoin exchange Mt.Gox in Japan being more than $385. It's been as low as $141 in the last 30 days, and the exchange has traded nearly 900,000 Bitcoin in that time.
The action isn't all on the Bitcoin. It's also on the exchanges themselves. Regulators aren't fond of having an imitation, digital currency competing with theirs, and Mt.Gox has had trouble redeeming customers' dollars. Other exchanges, such as Bitstamp, show less volatility.
Bitcoin, like gold, is what I call an "oh no" trade. It's a belief that something has intrinsic value that will exist even if governments don't. It attracts the fearful.
In my view, it also attracts people who don't know what money is. These people think of money as a store of value. In fact, it's a medium of exchange. These are different things.
A store of value is always going to hold that value. A medium of exchange has value only as it's used.
I explain it in terms of Aladdin's Cave. If Aladdin tried to spend that gold and those jewels all at once, on his return to Baghdad, kids would be playing with diamonds in place of marbles. It's the goods and services in that market, exchanged for each other, that define the market, and that define market value.
In other words, you can't hide from the marketplace. Gold, or Bitcoin, tells you that you can.
If the atomic exchange does come, and if you and your friends are up in the mountains with your gold when it happens, you'll come back to town one day and find that the world has converted to a bread standard, and that all your gold is worthless.
At the time of publication, Blankenhorn owned shares of Vanguard Global Equity Fund Investor Share (VGPMX).
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.