In spite of a spate of bad news about Bitcoin people are still fascinated, scared and intrigued about the possible new currency. Of course, there is still much confusion afloat – many people don’t know what it is.
For example, on a financial advisory radio show this morning, we heard one of the hosts saying, “I’d never invest in Bitcoin! Why the value has changed from more than one thousand dollars to practically nothing!”
Unless one is an ace programmer, one doesn’t “invest” in Bitcoin. Do you “invest” in US dollars? No, of course not. Now you could keep something called “US dollars” in a savings account, but that’s not investing.
You could buy another currency with US dollars, say, Swiss francs. Then, if the value of the dollar fell relative to the Swiss francs, you could buy back dollars and get more than you put in. Remember the Swiss Watch Index [SWI] of a few years ago?
We used to publish weekly changes in the value of the USD v. the SFr. based on a Swiss watch costing Sfr50 which happened to be almost exactly USD50 at the time. Later, the same SFr50 had become USD 55.
So, if she had put $5,000 worth of Swiss francs in a Swiss bank, the account would have been valued at $5,500.
Anyway, you can view Bitcoin as a store of value. It is like gold, silver, or dollars and changes value in relation to all of these. And like gold and silver, you can’t just spend it anywhere. The merchant has to be able to accept payment in Bitcoins.
In this respect, it is kind of like a credit card. At the beginning of the credit card era, hardly any businesses accepted payment by credit cards. It takes a large amount of trust that the transaction will be completed satisfactorily to both the buyer and the seller. And it takes a large infrastructure – phone lines or computer connection, good card reading equipment, and a huge back office to make sure all payments go to the right place.
But, back to Bitcoin. The recent news from Bloomberg is: “Japan Says Bitcoin Not Currency Amid Calls for Regulation.” Government bureaucrats just want to get their greedy hands on it.
“Japan’s government said Bitcoin isn’t a currency amid calls for its regulation a week after the bankruptcy of Mt. Gox, the Tokyo-based exchange that was once the world’s biggest.”
“In the U.S., states are wrestling with how digital-currency businesses could be regulated as money transmitters, while Russia has said Bitcoin is illegal under current law and Finland plans to treat it as a commodity.”
The last word goes to our “inside man,” our guru on things technical, our DS:
The latest in Bitcoin (within the past few weeks) is that the largest exchange claims to have lost their funds to hackers (they have not proven that the hackers weren’t insiders) and have gone bankrupt. The current price is a little over half of what it was before that news.My latest prediction is that the cryptocurrency named “Bitcoin” will not succeed due to certain social aspects of the community (hostility to new users and minorities of all kinds), but that multiple competing cryptocurrencies will displace it. Various cryptocurrencies will fill different niches based on the nature of the communities which form around them.For example, check out Dogecoin, which was created as a joke. The Dogecoin community raised $20k to send the Jamaican bobsled team to the Sochi Winter Olympics. They’ve had a few other charity events as well.
So, there you have it – believe him now or believe him later!