Now that BitCoin has crashed, trades for about $60/BTC and the Mt. Gox exchange has closed for 12 hours, it is a good time to notice the similarity between BTC and Gold.
Nay-sayers and I-told-you-so’s said the same thing about gold when it had setbacks over the last 12 years. During that time (2001-2013), gold has been the best performing asset class in the world.
Source: The Real Asset Report
Bloomberg declared it [Bitcoins] ‘Bubble-tastic’, the FT described Bitcoins as ‘less useful than Air
Miles’ whilst the Wall Street Journal described it as ‘a mysterious money which has
become the darling of anti-government libertarians and computer wizards prospecting in
the virtual mines of cyberspace. In Europe…it has found its niche as the coinage of
anarchic youth. . .’
The rhetoric used to describe Bitcoin, particularly by journalists, is word-for-word the same
as that used for gold and silver. ‘Gold bugs’ are frequently described as ‘anarchic’ or ‘antigovernment’.
Very few mainstream commentators have recognised what this rush into Bitcoin means,
whether it is something which proves to be untrustworthy in the long-run or not, at
present it is clearly something many investors feel they’d rather put their money into than
another bank account or asset-class. They feel they can trust it more than their banks and central banks. The other participants are just trying it out, and if they don’t get burnt the Bitcoin market cap will continue to grow as it matures as an alternative currency.
While BTC just hit $266, it’s hard to not call it a bubble. But a better analogy is a land grab. Like real estate, it is finite and there will not be that much more (doubling in 100 years) being made available.
Couple this with the facts that Bitcoin is easily transferable around the world in minutes and it is easily divisible, people can see BitCoin’s value as a medium of exchange.
The current growth in Bitcoin price is quite dizzying. Today it hit $240/BTC. Many commentators call it an irrational bubble. However there are a few features of Bitcoin that may make it not quite as crazy and irrational.
Here are the basic facts:
- There is a hard circulation limit of 21 million Bitcoins.
- There are at time of writing roughly only 11 million of bitcoins
- This is the first major digital asset that is also fungible (unlike say domain names) and not under the control of a single entity or government
- 1 Bitcoin is just an arbitrary unit. There is no problem owning 0.0000001 Bitcoins
- There is no barrier to entry to hoarding, earning and spending Bitcoin
- It’s international by default
The hard circulation limit together with the current limited amount of Bitcoin means this is pretty much a good old fashioned land rush. This is what most of the commentators are missing.
Yes as a currency I may not be able to buy groceries with it yet? There are lots of problems to solve. But none of that matters. Startups, programmers and regular users will solve all of these problems. What does matter is that if you don’t get some now, it’s going to be expensive in the future.
Get any group of Bitcoin nerds together and you’ll start hearing all sorts of ideas floating around for services and uses of Bitcoin that would have seemed completely outlandish just a couple of years ago. This is the future value.
Some of us local BitCoiners met up last night at Bar Loiue in Station Square and talked all about this exciting new currency, it’s implications for society and how we were all very silly for gathering without a security detail!
There were miners, dealers, doubters and market makers all on hand to learn from each other and to see exactly how far BitCoin could go in the real World.
There was also a documentary film team on hand to capture this historic (?) gathering and to help to tell the story of the BitCoin phenomenon. They have been traveling around the country doing interviews with some of the pioneers in the industry,
Good drinks and good stories were had by all. Come join us for the next Pittsburgh BitCoin Meetup!