Market Overview

Bitcoin: More Than a Bit Dangerous

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Bitcoin: More Than a Bit Dangerous

The bitcoin rage is in full effect.

At 11:09 am EST on December 9, 2013, the market was $879.70/$883.27. Wait, then it was $879.25/$885.28. Oops, the offer is now $889.23.

All in about one minute, the market for the virtual currency has widened to $10, or a little over one percent. The last prints have experienced a similar range within the past five minutes. Considering the recent moves in the trending universal currency, a one percent range could be considered tame.

In reality, proponents and purveyors of bitcoin are essentially no better than online gamblers. The concept of a currency “with no central authority or banks” (bitcoin.bitshare.cm) might be the most ludicrous and dangerous product to enter the global financial system. Ever.

Let's breakdown the bitcoin users to objectively analyze the efficacy of the online currency. There are roughly four classes of proponents: the libertarian, the speculator, the kitsch coffee shop owner and the manipulator.
The Libertarian

He is infatuated with the idea of using a currency that has nothing to do with the government. He resents having to buy and sell everyday merchandise with a currency that is controlled by his or any other nation's central bank. He would rather use a pirate monetary system that gives the finger to big government. He also probably lives in the woods and would rather use a currency that might lose 30% in one day rather than stare at George Washington's face. Not exactly rational.

The Speculator

Generally, he is in search of alpha. There is strong appeal in an “investment” that has the ability to produce double digit returns in one day. Imagine the return over 10 years! He also has never heard of the Dutch Tulip Bubble of 1637.

The Kitsch Coffee Shop Owner

This bitcoin acceptor/user is all-in. He has an undeniable appeal for all things trendy. If it is in fashion, he wants to be the first one to use it and let everyone know, subtly of course, that it is the standard for cool. Whether or not he has any idea of how or why his shoppe's bank account fluctuates so much and bounces a check here or there is not of importance. What is, though, is that his sweater is from a thrift store and his mustache is old-timey.

The Manipulator

This final class of bitcoin enthusiast is the smartest of the four. He understands the concept of supply and demand and how that pertains to the online currency. Because trading is global and 24 hours, he knows that, with his large wallet, he has the ability to affect supply and demand via his sweeping orders and large resting bids or offers, especially at pivotal technical points. Essentially, this trader can do whatever he wants, given his bank account and understanding of other similar players in the market. The virtual monetary world is his oyster.

Maybe in 10 years, this article will be laughed upon. Maybe in 10 years the world will use a unified currency. But maybe we think back at bitcoin in ten years and think, a) man, that did look a lot like the Dutch Tulip Bubble of 1637, and b) you know, Esperanto never really took off either…

In other words, buyer beware.

Posted-In: BitcoinEconomics Markets Tech Best of Benzinga

 

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