A Normal Day for Bitcoin, A Currency That Dies Every Day

People should know better by now that to judge the future of Bitcoin or cryptocurrencies in general on what is happening today, or this week, or any arbitrary but short time period. Yet, just like with the initial collapse of Silk Road late last year--where "everyone knew" all Bitcoins were spent and yet whose death seemed to spur an enormous rise in Bitcoin market value--so is the collapse and disappearance of prominent Bitcoin exchange Mt. Gox, with lots of people likely losing lots of money, you are hearing the Bitcoin is over.

antanacoins / Foter / CC BY-SAantanacoins / Foter / CC BY-SA

Bitcoin may indeed someday be over, though the enormous advantages of its protocol for many of the things people want out of money (and other things, as Jerry Brito explained in the December Reason) make me think that's an unlikely bet. But past results are no performance of future guarantees, or whatever it is they say in the world of High Finance.

This article from Businessweek has some nice perspective on why Bitcoin believers aren't ready to give up yet:

Some bitcoin believers are cheering the development, hailing it as the end of amateur hour for the crypto-currency. “It purges the final vestige of the first generation of infrastructure companies,” says Jerry Brito, director of the technology research program at Mercatus Center at George Mason University and a longtime proponent of bitcoin. “Who’s left? It’s the serious people, who are doing this right.”

Those people are working hard to assure the market that they are, in fact, serious. Several prominent bitcoin companies signed on to a statement vowing to shore up the credibility of the currency. The companies describe the need for bitcoin companies to submit to independent audits, balance sheet requirements, customer disclosures, and policies that don’t allow companies to leverage customer assets for their own trading.

And as you read people telling you it's all over, it helps to remember that the price in dollars of Bitcoin as of around right now--around $520, after a dip to below $460--is a low not seen since, wow, mid-November, slightly more than three months ago.

A reminder: if you had invested $1,000 in the horrible mistake of Bitcoin five months ago, that thousand would be worth about four times that today. After this Mt. Gox news.

Certainly, that huge value increase is not proof of Bitcoin's eternal value as either investment or currency (and inflation in the former isn't that healthy for use as the latter). But it is a sign that "it's over, man" seems doubtful. People still believe. And that's important when it comes to either investment or currency.

Some bonus Bitcoin science from September: why it isn't that easy for the protocol and blockchain to trace or block stolen coins.

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  • SweatingGin||

  • ||

    good times

  • ||

    Who would have guess that Magic the Gathering online exchange wouldn't be a pinnacle of professionalism

  • ||

    if you had invested $1,000 in the horrible mistake of Bitcoin five months ago, that thousand would be worth about four times that today. After this Mt. Gox news.

    How much are the 1.3 bitcoins i have at MT Gox worth after this news?

    or the $100 fiat?

  • Hyperion||

    Is it dead yet?

  • Invisible Finger||

    perspective on why Bitcoin believers aren't ready to give up yet

    Bitcoin has similar problems as fiat currency: the users are required to believe in it.

  • Sigivald||

    why Bitcoin believers aren't ready to give up yet

    Because they're believers.

    Sorry, Bitcoin-as-such was always too cult-like. Probably not the fault of the mechanism or currency itself, but nevertheless, there it was, contingently.

    (InvisibleFinger: All currencies, even metallic ones, require "believing in it".

    e.g. see Rothbard, "A commodity that comes into general use as a medium of ex­change is defined as being a money."

    Continuing to be used as a medium of exchange requires people to believe that state will continue; otherwise they would divest their money holdings for whatever they judged most likely to be the next money commodity [be it silver, slips of paper printed by the government, or BitCoin blocks], or in a worst case where they expected total monetary collapse to barter, into the most barterable or directly usable goods.

    There's no escaping "faith" in a money; the illusion in metallism is that the value of gold or silver is Really Real because of historical accident and that it's shiny.

    But they're fundamentally, as money in itself, no different from cowrie beads or slips of paper - because dollar bills can be pretty decorative and, hey, paper has uses, too.

    ["Economic analysis is not concerned about which commodities are chosen as media of exchange", ibid.])

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