You can't even hide a bitcoin under your mattress, but that's neither here nor there.
Actually you can if you have a hard copy private key, but that's also neither here nor there. ;-)
Bitcoin doesn't have an "exchange rate" any more than gold does. Both have a market price.
I'd argue exchange rate vs market price is a distinction without a difference. The whether you say market price or exchange rate, you need variable numbers of dollars to buy a given amount of euros, RMB, bitcoin, gold, or porkbellies. In all four cases that price is determined by how many people are willing to buy (and at what prices) and how many are willing to sell (and at what prices).
But I remain open to being proven wrong though. How would you define the difference between a market price and an exchange rate (other than that one applies to a currency and one applies to a commodity, because that would just become circular reasoning).
I don't realize a capital gain or loss when the dollar's value changes due to inflation or deflation. ... If I hide a dollar under my mattress for 10 years, I can still spend it for whatever goods or services it will buy at a later time, without realizing a taxable gain or loss.
That's because you live in the USA where our tax code is denominated in dollars. If you lived in Europe or China where the tax codes use Euros or RMB you would indeed realize taxable gains or losses as the value of a dollar changed. If you hold Euros or RMB in the USA you would indeed incur tax liability as the the market price of these currencies increased (in USD terms). I think these are actually taxed as ordinary income, not capital gains.
I said I wasn't going to debate whether bitcoin is a currency, and I'm going to hold to that.
But I think I can convince you of the difference in those terms simply by using the dictionary.
ex·change ratenoun
noun: exchange rate; plural noun: exchange rates; noun: rate of exchange; plural noun: rates of exchange
the value of one currency for the purpose of conversion to another.cur·ren·cyˈkərənsē/
noun
noun: currency; plural noun: currencies
1.
a system of money in general use in a particular country. "the dollar was a strong currency"
synonyms: money, legal tender, cash, banknotes, bills, notes, coins, coinage, specie
"foreign currency"
2.
the fact or quality of being generally accepted or in use. "the term gained currency during the second half of the 20th century"
synonyms: prevalence, circulation, exposure; More
acceptance, popularity
"a term that has gained new currency"
the time during which something is in use or operation.
Bitcoin fails the test on both counts.
USD, Euros, and RMB all pass with flying colors.
Now, I'm not saying that bitcoin isn't a currency. But that doesn't mean that I agree that it's a currency, either. I'm simply saying that
by definition, it doesn't have an exchange rate, while it very clearly does have a market price.
I concede the point about hiding it under a mattress. Well played. ;)