[nhaehnle]

Government currencies have the benefit that the government creates demand for them by using it as denomination for tax debts. Non-government currencies have no such external creation of demand.

It's actually quite curious that Bitcoin was able to take off the way it did despite this lack of initial forced demand. I wonder which was more important: the fact that there are so many anti-government ideologues out there, the fact that Bitcoin can help with illegal transactions, or simply the fact that it's a neat technology. I'm certain all three played a role, perhaps to a different extent at different times.

[Gormo]

Independent currencies don't have that particular source of demand, but economies are made of much more than tax debts. And you could argue that overbearing policy itself creates demand for currencies that enable untaxable (and other illicit) transactions. Government itself could be said to encourage demand for both forms of currency.

I doubt that the 'neat technology' aspect contributes much to the exchange rate; or little more impact than coin and banknote collectors have on mainstream currencies. You don't need to put much money in, or participate in many transactions, in order to examine the technology itself.