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Bitcoin Back Up

Back in 2011, Bitcoin, an alternative currency collectively managed, caught my eye. Currency geeks were getting excited about its character as a purely electronic kind of money. Predictions were being made that soon, businesses everywhere would accept Bitcoin. The suggestion was that, eventually, the Bitcoin would replace the dollar. There were some problems with security, though. A purely electronic money could be simply hacked away. Bitcoin didn’t spread very far. The value of the currency in relation to the dollar went down.

virtual currency logoI thought that, before long, Bitcoin would be dead and gone.

It’s not. Oh, Bitcoin is still quite marginal, as money goes, but people are still trading it and spending it. What’s more, the value of Bitcoin has gone back up over the year and a half – from $10.92 cents per Bitcoin in August of 2011 to $26.75 today. If I had bought some Bitcoin back then and sold it today, I would have more than doubled my money.

Color me wrong… I think. Help me out, Bitcoin fans. Where do you see the currency going over the next year or two?

3 thoughts on “Bitcoin Back Up”

  1. Bill says:

    I’ve been fascinated by bitcoin since its inception although, like you, I’ve never actually dabbled in it…when I’m looking for insanely risky, highly speculative investments I have other options open to me where I have some expert knowledge that can mitigate some of the risk. But I do watch bitcoin, with great interest.

    I think it’s important to recognize the following things about bitcoin:

    1. By its very nature, bitcoin has aspects of a classic Ponzi scheme. I’m not saying it is a Ponzi scheme (that would require someone to be actively scheming, with bad intent, which I don’t believe is true), but it has the fundamental characteristic that the first folks in (as “miners”, in bitcoin terminology) make most of the money, while the last folks in mostly get screwed.

    2. Treating bitcoin as an investment (instead of merely an experimental medium of exchange) is such a bad idea, on so many levels. First off, it’s an experiment without precedent…which is to say there’s no way of knowing, or even guessing, how this will all turn out. I’ve learned not to bet on experiments. Second, bitcoin’s legal status is indeterminate. The gummint might-could decide to order it shut down tomorrow, in which case your ‘investment’ would instantly turn into nothing more than a handful of electrons scattered across the internet. Bummer. The IRS has questions about bitcoins and their owners…double bummer. And recently bitcoins have proven all too easy to steal. Unlike the case with real money, you have pretty much no legal recourse, in practice, if someone defrauds you of your bitcoins, and if they’re stolen there’s basically no physical evidence and no electronic trail law enforcement can follow, so you can pretty much pound sand. With ‘real’ money you at least have a chance of getting electronic transactions reversed or getting the cops to investigate a physical theft.

    Finally, there’s the really interesting ethical dimension. Thanks to the near-impossibility of tracing bitcoin transactions, bitcoins would seem to be a nearly ideal medium for illegality of all sorts. Silk Road loves bitcoin for this very reason, as do some online gambling sites. Though I have no evidence, I suspect that there are probably more conventional criminals who rely on bitcoin, as well. Personally, I’m not interested in supporting a market for illegal activities. Sure, the same can be said of the ‘real’ money market. But the difference is that (1) I don’t have the option to opt out of the real money market, and (2) even if I did, my participation in the real money market is a vanishingly small contribution to it; the same could not be said of my participation in the much, much smaller bitcoin market, where even a small investment on my part would be a mathematically significant contribution to the total market.

    Long story short, if you want to throw a coupla bucks of mad-money at some bitcoins just for the hell of it, go for it (I guess). But please don’t view it as an investment, and please don’t put in more than you can very easily afford to lose. And please don’t gripe about others who enable criminal activity by turning a blind eye to it in the name of turning a quick profit.

  2. nikki says:

    Bitcoin was not developed as an investment. It is developed to be used as a medium of exchange. Bitcoins are to be used to continuously be used back and forth in commerce. The sooner you get the idea out of your head that they’re supposed to be an investment, the sooner you’ll drop the crap that bitcoin Is a ponzi scheme.
    Even if some people do choose to hold onto bitcoins and their value increases during that time period that doesn’t qualify as a ponzi scheme. Their is no intent to deceive anyone out of money. By your definition of a ponzi scheme, Apple, Google, IBM, P&G, and every other company in the stock market is a ponzi scheme because people who first found value in those companies profited more than later adopters.
    Maybe bitcoin is over hyped by many people who believe in it and it will remain a fringe economy but not for the reasons you identify. You’re simply ignorant.

    1. Peregin Wood says:

      Bill, you have defiled the temple of the worship of Bitcoin.

      Acknowledge your sin or prepare to be castigated!

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