Agorism Cashes In! Some Perspective on a $500 (and Soaring!) Bitcoin

Over the weekend the privately designed and created digital currency/investment vehicle Bitcoin (it was designed as the former, seems to be working more effectively right now as the latter) hit an exchange value of over $500--closing at $528.32--on its most prominent exchange, Mt. Gox. (And as of the minute I write this, it's already up to $640 today.)

You first probably heard of Bitcoin from one of your kooky friends, in the wilder ends of agorist economics (end the Fed, escape the State, black markets rule, you can buy drugs with them anonymously online!) and/or high-tech futurism (new technologies are giving us wider and wilder freedoms from state control than you could ever know).

The value of Bitcoin in dollar terms survived its first supposed bubble back in April (when it topped off at $266 before falling to $65 within a week), and the shutdown of Silk Road, its most prominent use for actually buying goods and services

Lots of alarming reports arose about people having their Bitcoins stolen, or the system being gameable, or Bitcoin exchanges disappearing overnight.

Despite all that, in the short term at least, believing in the wild future seems like it was a very, very smart idea. There are various scruffy festivals and conferences I attended in 2011 where, if even half the people there were putting any money where their mouths were, the assembled wild-eyed dreamers easily have a market cap exceeding $40 million today.

For some perspective: if you dropped a grand on Bitcoin the first time (I believe) it was mentioned here at Reason, on April 20, 2011, it would have been worth around $4.4 million yesterday.

If you had spent a thousand bucks on Bitcoin on the day Reason.TV first ran a video interview with Jerry Brito about Bitcoin, for those who trust the image more than word, on June 1, 2011, you could have turned that yesterday into $54,465.

If, on the day that Wired magazine confidently declared that Bitcoin was through--"The Rise and Fall of Bitcoin," out on November 23, 2011--you spent a grand on the dead digi-currency, that would have been worth $221,982 yesterday--a lot of gift subs to Wired.

if you bought in the first time we wrote at Reason about Bitcoin's first known appearance in a lawsuit, on August 15, 2012, you could have cashed that out yesterday for $39,873. 

If you dropped a grand at the height of the April "bubble," on April 10 this year, right before it all seemed to come crashing down, that would have been worth $1,986 yesterday, nearly doubling your investment.

If you had dropped that grand on May 21, the day my Reason article on government attempts to regulate or stymie Bitcoin appeared, that would amount to $4,292 yesterday.

If you had put a grand of U.S. fiat money into Bitcoin the day before the Silk Road bust--which you might recall led many to think a death blow had been struck to the currency--you could cash out that grand yesterday for $3,657. If you had dropped a grand on Bitcoin a mere month ago, that would be worth $3,139--substantially more than tripling in a month. 

(All estimates based on the day's high via this chart for the buy price, and yesterday's close of $528.32 for the sell. And remember, this morning it has soared another 20 percent or so. This morning.)

What any of this means for the future of Bitcoin as either currency or investment vehicle is uncertain, of course as past performances are no result of future guarantees and all that.

And as anyone will tell you, wild fluctuations in value aren't really the best quality for something you want to use as a currency, as opposed to an investment vehicle. But it is worth noting that academics have found that even reports of the occasional hack, scam, and theft of Bitcoin seems to have no effect on its market capitalization or worth, and hacker types are doing their best to make sure Bitcoin can stay largely anonymous, though means such as "dark wallets."

But that lots and lots of people are putting their money into their belief that private, largely anonymous, state-free, black market friendly, digital currency vehicles are the wave of the future at the very least should put a smile on the shade of Sam Konkin, libertarian movement father of agorism and hopefully put a lot of change in the pockets of his fans.

Reason on Bitcoin.

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  • The Late P Brooks||

    Also, in totally unrelated news, the DJIA hit 16,000 this morning.

    Just a weird coincidence. Pay no attention to that monetarist behind the curtain.

  • np||

    But that lots and lots of people are putting their money into their belief that private, largely anonymous, state-free, black market friendly, digital currency vehicles are the wave of the future at the very least should put a smile on the shade of Sam Konkin, libertarian movement father of agorism and hopefully put a lot of change in the pockets of his fans.


    Tis the season: The Legend of Anarcho Claus
    by Samuel Edward Konkin III and Victor Koman

  • Palin's Buttplug||

    I saw that the Vanderwinks (or whatever) twins from Facebook fame were starting a bitcoin ETF. That could signal a top in the value by itself.

    Nevertheless, if you can't short bitcoin then it is doomed as a currency. Shorting into a bubble is dangerous anyway.

    Anyway, may it survive and prosper.

  • Paul.||

    Nevertheless, if you can't short bitcoin then it is doomed as a currency. Shorting into a bubble is dangerous anyway.

    By 'short', you mean have government-approved exchange with a method to actually place "Short orders".

  • Cytotoxic||

    You can short BTC and the Wiklvi ETF was started up months ago and hundreds of dollars beneath BTC's current valuation.

  • Marc F Cheney||

    Nevertheless, if you can't short bitcoin then it is doomed as a currency.

    That strikes me as a very strange claim. What's the reasoning behind it?

  • Paul.||

    It is a strange claim. Everything can be shorted. I suspect Shrike is describing something within a narrow set of guidelines.

  • Neoliberal Kochtopus||

    Over the weekend the privately designed and created digital currency/investment vehicle Bitcoin (it was designed as the former, seems to be working more effectively right now as the latter)

    I don't see the difference, really. I mean, I could invest in GBP or EUR if I wanted to, right?

  • np||

    Regarding the volatility, one has to remember that this is the exchange rate. The monetary supply itself is stable and fixed. One can easily hold bitcoin as the constant unit and ask why the dollar is so volatile in comparison.

    Regarding its price growth, there's also some arbitrage opportunities between different markets, exchanges and currencies if you're quick.

    Anyways I kinda hope today's Senate hearing will actually dent its insane price a bit actually

  • Adam330||

    You could mark its price against any commodity or basket of goods and you'd see the same run-up.

  • CE||

    Just like you could hold a boat constant and wonder why the ocean keeps bobbing up and down.

  • Juice||

    Regarding the volatility, one has to remember that this is the exchange rate. The monetary supply itself is stable and fixed. One can easily hold bitcoin as the constant unit and ask why the dollar is so volatile in comparison.

    But prices for tangible goods don't fluctuate in dollars, but they definitely fluctuate wildly for bitcoin. Basically if you've ever bought anything with Bitcoins besides fiat currency for a profit, you've lost money.

  • ||

    One can easily hold bitcoin as the constant unit and ask why the dollar is so volatile in comparison.

    With bitcoin constant I find it Funny how everything is volatile in the same way. Gold and the dollar and pork bellies all drop at the same time then they all rise at the same time.

    Also funny how with such huge price drops in everything that the world is not screaming because of the massive deflation.

  • waffles||

    Brian, did you buy any bitcoins? Do you think the price increase has anything to do with adoption and usage of the technology or is it just some supercharged irrational exuberance?

    There aren't really any fundamentals to compare. It's really new. At any rate, you would certainly have to pay capital gains tax on those bitcoin windfalls, right?

  • Paul.||

    At this time, my guess is capital gains would only occur if you converted them to a form of wealth the government recognized.

  • Death Rock and Skull||

    I NEVER talk about investments. But, sell that shit now. And then buy bitcoins to use as anonymous currency after they crash.

  • Paul.||

    I ALWAYS talk about investments.

    Tip for the group: Buy low, sell high.

    It's a guaranteed strategy.

  • SweatingGin||

    $673 on Mt Gox now. $646 on Coinbase.

    Mt Gox Orders

    Set it to group by $5. There's not a whole lot for sale, hasn't been for most of this rally.

  • ||

    I sold my 0.80 bitcoins that I had when the price was at about $400 a few days ago.

  • The Late P Brooks||

    You could mark its price against any commodity or basket of goods and you'd see the same run-up.

    Commodities and goods nominally priced in dollars?

    Also, this morning, the talking heads were braying happily about our successful efforts to drive down the exchange rate value of the dollar.

    YAY!

  • The Late P Brooks||

    $673 on Mt Gox now. $646 on Coinbase.

    Interesting. Can you arbitrage that?

  • SweatingGin||

    The Late P Brooks|11.18.13 @ 12:31PM|#|–|filternamelinkcustom

    $673 on Mt Gox now. $646 on Coinbase.

    Interesting. Can you arbitrage that?

    Yes, you can arbitrage it. Coinbase probably wouldn't be the best one to do so on, but other exchanges have a similar price difference.

    The trick is, it's apparently pretty hard to get USD out of Mt Gox lately. I figure that's the main reason for the differential there. There are people running bots to arbitrage it, as well, so not much reason for that large of a gap.

  • Westmiller||

    "pretty hard to get USD out of Mt Gox"

    IF most buyers paid USD and they can't legally "sell" or convert back, that would create a totally artificial "bubble" in the current "buy" price.
    Remember: BitCoin is a private fiat currency that has no reserve assets.

  • R C Dean||

    Imagine my surprise: I have a few bitcoins I bought awhile back (at around $125/pop, if memory serves), just out of curiousity to see how the whole thing worked (full disclosure: it takes several days for your new 'coins to actually show up in your wallet, payments/transfers are generally within a few minutes).

    They had just recently run up some to $125, so I was actually expecting a pullback.

    Lesson learned: invest in exotic vehicles on a momentary whim. Seems to pay off big.

  • Cytotoxic||

    DAMMIT just a couple weeks ago I was going to do it but I was unwell and thought 'I should wait for the pullback'. There better be a pull-back now and I think there will be if its anything like the last insane price increase...please.

  • SweatingGin||

    Yup. I was sitting there at $150 thinking I would buy as soon as it pulled back. I've been waiting for that since.

    Got a couple in the couple of hour silk road drop, though. Wish I had gotten more.

  • The Late P Brooks||

    Lesson learned: invest in exotic vehicles on a momentary whim.

    R C Dean: Ferraristi!

  • kilroy||

    If you are interested you can watch Bitcoin transactions in pseudo real-time at https://blockchain.info/.

  • SweatingGin||

    There's also Listen

    Or, if you want the locker room humor version, Listen to Buttcoin

  • Cytotoxic||

    The CosbyCoin doesn't seem to work so well.

  • SweatingGin||

    It worked for me. I thought it was hilarious.

  • Cytotoxic||

    Works for me now. Hilarious.

  • The Late P Brooks||

    There are people running bots to arbitrage it, as well, so not much reason for that large of a gap.

    I would certainly expect a price differential that big to be smoothed out in short order. But if there are structural impediments to transactions, that would explain at least part of it.

    If you can't do a straight dollar exchange, could you perhaps do some sort of commodity deal, like oil, or gold (something with a clearly established market price)?

  • CE||

    Anyone want to predict the date when the Feds close it down? It's used for money laundering and anonymous transactions and tax avoidance and buying drugs, it's just a matter of time.

  • waffles||

    Close what down exactly? It's decentralized.

  • ||

    Bitcoin is completely decentralized, the Feds couldn't take it down even if they wanted to. As long as even one person has a copy of the source code it will always live on. At best, the Feds could put the exchanges out of business, but even that would not stop people from just meeting in a parking lot somewhere and physically handing over dollars for Bitcoins.

  • Cytotoxic||

    Also, the biggest exchange is in China now. It's strange-BTC seems to have not only sanction but even some warm feelings from the Chinese government.

  • Juice||

    Damn, you turn around and Bitcoins double in price. I'm kicking myself for not buying some when I first heard of them. At the time they were around a dollar, maybe a bit less. But, also at the time, it seemed crazy to put any significant amount of money into them.

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