I am old fashioned, gold and silver coins (bullion or numismatic) are what I prefer as an alternative asset class to cash (as a defense against the printing presses of the world's Central Banks). I do not understand the buzz with Bitcoin, nor its meteoric rise to stardom in the last 2 months. Yes, may be there is a finite supply of Bitcoins in this universe and if so yes, someone may choose at will to offer an unfathomable premium for one. I am willing to pay more (not insanely more) for something that is rare, unique and in a finite supply if that something has withstood the test of time. Bitcoin may be the former but definitely not the latter. It is a poorly understood concept by many who embraced it with blind faith, the concept of crypto-currency is definitely not new. See Bitcoin wikipedia page. With brilliant marketing and plenty of media buzz last 2 months the price of one Bitcoin surged to match the price of one ounce of gold. Now that to me is beyond insane. Many might secretly wished they had bought a few Bitcoins instead of working at their day job. Even if Bitcoin proves itself in the future to be a viable alternative transaction "platform", it is a platform plagued with so many unknowns today, with the exchanges located in some faraway places totally unregulated. It is like doing business with the underground drug lords. If someone were to hack into the network and you found your Bitcoins gone overnight who are you going to call? (Ghostbuster?) (and that has happened to some though not publicized). Yet many jumped on the bandwagon hoping to get rich on Bitcoins and never having to work for a living again.
Look at the screen grab of the Bitcoin trading chart on Mtgox.com above, taken on 12 07 2013 5:04 PST. A method of "exchange" this volatile cannot be a currency, it is poker chips at best. Something that went up this fast on pure speculation and hype will come down just as fast as soon as that hype dissipates. China halted acceptance of Bitcoin payment last week to be followed by Baidu doing the same citing unstable prices and Bitcoin promptly crashed to a low of $576 overnight (50% off its peak). Wasn't there a lucky person who drove away with a Tesla Model S paying with his (or her) bitcoins. Kudos, you are one lucky person. If you were smart, you would quickly sell that Tesla S and lock in your gains if the dealer has not come running asking for the car back telling you he has made a huge mistake.
Now that I have vented my thoughts on the next Tulipmania, I am going to curl up by the space heater this wintry evening and read Charles Mackay's book - Extraordinary Popular Delusions and The Madness of Crowds.
We had picked up a copy of the 1993 hardcover edition published by Barnes and Nobles Books at a local Friends of the Library book sale. This 714 page classic, a Jesse Livermore's favorite, is definitely not an easy read, but I shall attempt to make some progress tonight.
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