My (Present) Take on the Bitcoin Price Boom

… has, conveniently enough, been largely stated by someone else. (Loved the Vonnegut quote, btw.) Technically his isn’t a stance, more advice/a warning, but at the heart of it it is. My only point of digression is that I’m a little surer than he is that the current BTC/USD rate change is unsustainable, and that it will not only plateau but actively reverse.

To be clear – and this is something Faber might have clarified as well – I claim this is the case not because of some deterministic theory by which history must repeat itself; rather, in this context “history” tends to repeat because in all speculative bubbles the economic forces at play – the logic of the situation – is fundamentally the same. The degree to which people can profit tremendously in absolute terms merely from trading Bitcoins naturally gives rise to countering economic forces, and these will increase with the price of the digital currency.

I’m aware of the counterclaim that the value of a Bitcoin is purely a matter of a growing Bitcoin economy outstripping the pace at which Bitcoins themselves are created, but this doesn’t change the situation I just described: one Bitcoin is one Bitcoin, and so if someone bought one a year ago for the going price of $12 and can now sell it for upwards of 75 times that, that’s all that matters to the point I’m making. The tremendous value jump of Bitcoins means an ever-greater deviation between its speculative, resell value, and the advantages that Bitcoins in themselves are supposed to bestow upon their owners in use (this useful distinction is quite old). These advantages are not “magically” inherent to Bitcoins at any cost, and so the incentive to create competing currencies – with the secondary result of bringing its value under check – will only increase; this, alongside the “classic” bubble-buster realization that something here just isn’t sound to begin with…

One other minor quibble with the article – he seems to have gotten the x-axis order backwards.



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