What Does it Mean to Measure Your Wealth in Bitcoin, and Why is it Important?Tulips
The average person hears bitcoin and immediately thinks “Digital Tulips that were once worth almost $20,000.”
Whether that narrative is the first thought in your head or not, I encourage you to slowly read this article with an open mind and keep the ability to question your preexisting assumptions.What is a Unit of Account (UoA)?
Today, if you live in America, you think of stocks, bonds, and everyday goods in terms of prices. These prices are quoted in USD (dollars).
For example, 1 Big Mac may be priced at $3.99 and 1 share of Apple stock may be priced at $322.
In a different country (with a different currency / unit of account), 1 Big Mac may be priced at 3.57 Euros. A dollar and a euro are two different currencies and can be used as units of account.
Bitcoin is also a currency. Currently 1 Bitcoin is worth $10,000. Each bitcoin can be broken into 100,000,000 different parts just like 1 Dollar can be broken into 100 cents. Each part of a bitcoin is called a Sat (or Satoshi). A Sat is named after the pseudonymous person who created bitcoin.
Just like you can price a Big Mac in dollars and euros, you can also price a Big Mac in Bitcoin.
Currently, 1 Big Mac = 0.00039900 Bitcoin.
Remember, this can also be written as 39,000 Sats.Using Different Unit of Accounts for Investments
For the US stock market, almost everyone in the world thinks in terms of USD (US Dollars). That’s how all US stocks are traded (against the USD).
Here is an example of SPY. SPY is an etf that tracks the S&P 500 (the top 500 largest companies in the US).SPY (USD)
However, you can price SPY (and other US stocks) using different currencies. Below is an example of pricing SPY using Bitcoin instead of USD.SPY (BTC)
This chart looks completely different even though it is the exact same asset (SPY).