Proponents of Bitcoin, a purely electronic alternative currency, say that their currency is more trustworthy because it isn’t directly linked to any government and isn’t muddled up with regulation and politically-motivated finance policy. Bitcoin is wild and free and libertarian. Praise be!
The federal government shutdown provides a great test of the claims of Bitcoin’s superiority. After all, if there ever was a time for a government-regulated currency to show its weakness, this is it.
The U.S. dollar is not having a good day. It’s lost 17 hundredths of one percent of its value since currency traders began their work this morning.
Bitcoin, however, is having a much, much worse day. Right now, the Bitcoin has lost about 30 percent of its value, compared to where it started this morning. At one point today, Bitcoin had lost 40 percent of its value.
In this particular economic storm, Bitcoin is proving itself to be a rather unreliable ship.
Postscript: Why is Bitcoin tanking today? It might not have anything to do with the federal government shutdown. Reuters links Bitcoin’s valuation to its heavy use in an online network called Silk Road, where people buy illegal drugs like heroin and cocaine. Silk Road was shut down today.
Bitcoin, it seems, may not be so much a protest against the Federal Reserve as an evasion of the DEA.
On second thought, maybe that’s not a fair characterization. Silk Road and Bitcoin have also used by assassins looking for clients.