An Anarchist, Imaginary Form Of Money Is A Bad Investment? You Don't Say!

The Bitcoin Crash

It didn't take long for New York magazine's Kevin Roose to change his tune on Bitcoin, the "internet currency," which made headlines this week because... well, because people were writing headlines about it. The value of a Bitcoin rose more than $200 in just a few days, which as we all know, means it will keep going up, forever, cause like, duh man.

Except, you know, then it took a swan dive the next day. Its value is going up and down like a roller coaster, and the systems in place to buy and sell the currency make it difficult to capitalize on the swings. Basically, its a penny stock that's even less regulated and less liquid.

As Roose wrote in his original piece (emphasis, mine), "Several friends warned me about buying a Bitcoin now, since prices are at an all-time high, and most smart people are predicting that the bubble will pop eventually. But many people expect the price of Bitcoins to go higher than $140. Henry Blodget half-jokingly suggested that Bitcoins could reach $400, and there's no logical reason why they can't keep rising beyond that. The more publicity Bitcoins get, the more demand there is. And since supply is limited by design, and no central authority can step in and "print" more Bitcoins, it's theoretically possible that the price could keep rising for a while before a bubble burst happens."

It's also theoretically possible that Kate Upton will sleep with me, and my wife will be cool with it.

My Bitcoins are Up Here....

How long will it take Slate's Farhad Manjoo to backtrack? After all, he also went into Bitcoin with blind enthusiasm:

"Let me begin this column with a lengthy disclosure. One morning last week, I stopped at my bank, filled out a withdrawal slip for $1,027.51, and walked away with an envelope full of cash. The odd amount was deliberate; I had been instructed by LocalTill to be exact in everything I did. What’s LocalTill? Don’t bother Googling it—its shady-looking website offers only murky details, explaining that the firm is a way for “merchants to accept secure transactions when selling goods online."

Sounds super!

"Bitcoin, of course. Bitcoin is a “digital currency” invented in 2009 by a cryptographic expert who went by the pseudonym Satoshi Nakamoto, but whose true identity remains unknown."

Well he sounds like someone I'll trust my money with!!!

"Meanwhile the price just kept going up: Early last week the value of bitcoins soared past $100 each. This week, it went past $200. If you want a bitcoin today, it will cost you about $235, and if you wait till tomorrow, it will be more."

Because the value of imaginary currency just goes up, up, UP!!!

"The world’s supply of bitcoins is essentially fixed, but because people in the media keep talking about it, demand keeps rising. This leads to higher prices—and as prices go up, people who currently hold bitcoins develop greater and greater expectations for the currency. This causes bitcoin holders to hoard their stash, which further reduces supply, which in turn boosts the price and sparks yet more media attention—and the cycle continues until the bubble pops. Thus, by writing about bitcoin, I’m serving, in some small way, to raise its price. And as of last week, that benefits me directly."

Some of the worst economic analysis I've ever read. Buy Bitcoins, then get your friends to buy Bitcoins, and then they get their friends to buy Bitcoins. Every friend you get, the more money you earn! THIS IS A PYRAMID SCHEME, PEOPLE! PYRAMID SCHEMES COLLAPSE TERRIBLY!!!!!

"When the bubble will burst, at what price and for what reason, is completely unpredictable. And until then, while prices are going up, you could make a lot of real money from this digital funny money. My own guess is that the bubble’s popping isn’t imminent, and I think that when prices do fall, they’ll land somewhere higher than the $138 I paid for my bitcoins."

This is based on nothing. Absolutely nothing. It's irresponsible financial reporting. Farhad might as well just take the money from your pocket and throw it into a paper shredder. U.S. currency is no longer backed by gold, but it is backed by the power of the U.S. Government. It has something real to peg it to-- the American economy. Bitcoin's central authority is a guy using a fake name that nobody has ever met. Bitcoin could easily be worth ZERO.

As of this writing, one of the biggest Bitcoin websites, where Manjoo bought his Bitcoins, is down due to technical difficulties. According to a MtGox spokesperson, "Upgrading computer systems means ordering more servers (2 weeks timeframe), setting up (1 day), load testing (2 weeks) and deployment (1 day). It's a process that can take up to one month in total."

Just like the stock exchange!!!!

MtGox is claiming a Denial of Service attack by hackers, but in reality, it's probably closer to a "gold rush" that's overwhelmed their substandard servers. All the media has caused people to flock to these sites, which were unprepared for such a large influx of customers.

A Bitcoin's value now, by the way, is $75 and dropping fast.

Manjoo and Roose should by publicly flogged for touting this speculative nonsense.