Article by Mike Shedlock
Of all the topics that readers have pleaded me to write about for months but I never did until now, “bitcoins” are at the top of the list.
In private emails, I stated on many occasions “bitcoins are a scam”. I now take that back, “scam” is not the correct word. Others whose opinions I highly respect, state the same thing.
For example, Geoff Turk at GoldMoney stated in an email response:
“I have spent quite a bit of time researching Bitcoins and have not found anything scam-like about them. Price volatility is another matter, and that is a result of an increasing demand for a relatively scarce resource. There may be individuals attempting to manipulate the price in some way, which we know is possible in any small (or even not-so-small) market. However, in my opinion the Bitcoin protocol itself is quite sound, and it creates an interesting hybrid of a commodity without corporeal existence that is nonetheless limited in supply.”
That was not an endorsement of bitcoin, rather it was a statement that my labeling of bitcoin as a scam was incorrect. I agree, with apologies offered to bitcoin.
OK But What Is Bitcoin
If bitcoin isn’t a scam, then what is it? I have struggled with that question, which explains why I never have written about it.
Wikipedia offers a history and description of bitcoin that is rather fascinating.
Who Accepts Bitcoins?
For months I would search for companies accepting bitcoins as payment and found scant offerings. The same could be said for gold.
Yet, the total value of gold at a price of $1,600/oz would be something like $7.9 trillion. The total value of bitcoins is extremely volatile, fluctuating around $1 billion. Simply put, there is no comparison in terms of total price or volatility.
The record 9 percent drop in the price of gold was matched by a 70% plunge in the price of bitcoins in a similar timeframe.
Bitcoin Store
A few weeks ago I decided to do another search for businesses that accepted bitcoins. I was surprised to discover that a new entity, the Bitcoin Store, offers 500,000 electronic products for sale, accepting only bitcoins a payment. The products include high-end digital cameras.
I decided to call the store up and ask a few questions. My timing was fortuitous. The owner of the…
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Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit his blog at http://globaleconomicanalysis.blogspot.com
