A few words about bitcoin…

Some years ago I sat down and studied classical financial bubbles. It was at the time when the stocks belonging to IT-companies rose sky high. Companies were regarded as financially sane even if their P/E-ratio  proofed that the companies were on the verge of bankrupcy. In Sweden the value of Boo.com increased with hundreds of percent in 1999 while the real profit of the PRODUCTION of the company dropped… A classical financial bubble… In 2000 it all ended with a crasch.

Today I have been studying the bitcoin-bubble.

In one way it seems interesting. A currency has been created that makes it possible to bypass the governments. An electronic currency. Interesting. VERY INTERESTING! (Read Rick Falkvinge for an explaination as to how it works!)

But… For the moment I just shake my head.

The value of bitcoin has increased 100.000% in a year, 55% in two weeks and 10% today only. That does NOT sound good at all…

Many have warned about the development (look here, and here and here). Others are more positive like ”Virtually shocking” and Rick Falkvinge who writes:

This can be hard to grasp. If you had changed 2,500 euros into bitcoin last spring, they would be worth more than two point five million euros today.

and

So why am I so certain that the value will continue to grow? So certain that I bet all of my own money on it? The supply of bitcoin is limited, and on a timescale of years, it is fairly constant. Nobody will issue more bitcoin to meet demand. This means that as more people exchange national currencies for bitcoin, the value of one bitcoin rises.

The sad thing is that the opponents do not see anything good in bitcoin while those that like bitcoin seems to be totally uncritical…

Just to make it clear. I do not believe that bitcoin is a scam. But I KNOW that increases like the one we can see at the moment, normally leads to craches, scam or no scam!

This does not mean that the TECHNOLOGY is bad.

In 1999 and 2000 we hade the bubble in the IT-market. Speculation is one thing, the technoloy another. In Sweden we also have the Dala Djupgas business.  It rose from 10000 SEK to 100000 SEK before it crashed. In the 1860 there was the railroad bubble. In the 1600s the tulip bubble…

And in 1848, my favourite. The speculation in cereals in the harbours of southern England. The cereals stayed in the storehouses but switched owners and the values increased and increased until… the rats came! With the rats the need to trow the mould cereals in the sea. And thus the bubble burst!

55% increase in two weeks… 100 000% increase in a year… Well, well… A classical pattern. We have seen all this before, many times!

But dont make the mistake to say that bitcoins as such are wrong, just because there is an ongoing speculation. The technology is always something else than the speculation on the technology.

And not all critique is good. Some say that bitcoins will have no pratical value because there is noone that coordinates it. no central bank behind it. The new thing is that WE create the market. If many starts to deal with it it will gain power and strength and thereby legitimization as currency. It gets the value that we want it to have.

But that wchish legitimizes it will also be the great danger to the new currency.

Lets hope it survives the crasch. If bitcoin does so, it will become interesting!

But if it is to survive, then some of its creators and defendors have to act differently and start to map out a longterm strategy for it, beyond speculation and crasches… IT IS NOT A GOOD SIGN THAT THE PEOPLE THAT LIKE BITCOIN DO NOT DISCUSS THE DANGERS OF THE SUDDEN RISE IN VALUE!

 

PS

I will write more about it to the weekend. But more about its positive sida. That individuals or groups of them creates a currency is nothing new (cupons in stores is a kind of currency). But that it is possible to do this in a large scale is something new. I find it fascinating!

Annonser

6 thoughts on “A few words about bitcoin…

  1. I think we do talk all the time about the dangers.

    But your percentage calculations are wrong – its a thousand times higher not 1000% since a year back.

    The main people buying right now are not only speculators, it is people who want another currency that can not be changed and printed do deflate it at any time by governments.

    What we need to get done with the Bitcoin is to start saying; I accept it as payment. I do. Then the real change will come, because business becomes way more efficient than the once that uses banks.

    Here is an example (since I work with international trade):

    1. My customer pays me money by TT payment; 5 to 10 days wait – 10 to 50 USD to the banks.
    2. I recive the money and pay my bank 10 USD just to get it in to my account, but I am a bit slow so I send it two days later to the factory. Sending it – minus 10 USD again.
    3. The chinese governement is slow, and the banks are even slower, so it takes anything from two weeks to four weeks to transfer the money. Minus charges for receiving the funds.

    It makes people scared, makes people angry that things does not get done and the banks rip you of all along the way. And the above is the most simple type of transaction. Try doing a payment against document or a BackToBack Letter of Credit and you pay waaaay more than just using TT payments.

    If I could just pay instantly to the customer the deposit, I only need a clearing house to hold the money for a day or two until the documents from the shipper has come. It would decrease time and save huge money for everyone doing international trade.

  2. The main problem with BitCoin is: all currencies that ever emerged ”from the people” did so because they were linked to a tangible value. For example, in colonial America tobacco became a currency base. In ancient times, gold became… urhm, the gold standard, if you will. The circulating currencies were either commodity money or fiat money imposed by a goverment. The credibility came from its previous goods value – before the complicated ”non-monetary” bartering converged into using tobacco/seashell/gold/silver for all transactions.

  3. You say it’s like a bubble. The fact is that 1000x rise happend when Bitcoin emerge from a nerds hobby to a currency that people use for payments. The slower rise right now is driven by more and more people starts using Bitcoins. If you look at statistics then you see the largest exchanger only have 1/6 of total transfer volume. So the most of BTC:s is not used by ”sharks”.

  4. Ping: Bitcoin som alternativ valuta « Sverige är inte världens navel!

  5. Ping: Vad hände med bitcoin? « Sverige är inte världens navel!

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