If bitcoin can be converted into fiat currencies at a lower transaction cost than the fiat-to-fiat conversions made by banks and credit card companies, it’s a superior means of exchange.
One of the most common comments I hear from bitcoin skeptics goes something like this: Bitcoin isn’t real money until I can buy a cup of coffee with it.
In other words, bitcoin fails the first of the two core tests of “money”: that it is a means of exchange and a store of value. If we can’t buy a cup of coffee with bitcoin, it obviously doesn’t qualify as a means of exchange.
The confusion here is the same one that plagues the conventional understanding of the foreign exchange markets: people confuse exchange and convertibility, which are both flows, i.e. transactions.