I'm having fun watching traders sneer at bitcoin today because of it's fall from grace. Personally I think it's done remarkably well. I was expecting it to drop to the $50 - $60 level before climbing back up. I felt quite proud of the little currency that could when it refused to go under $100. That should be a fair chunk of the early "easy" money and speculators out of it.
Got to admit. I did get a smile out of seeing the speculators moaning to high heaven about MtGox going slow. People these days seem to think Google is search and that's it. There are other major exchanges, during the panic they all seemed to be working fine to me. Hey guys? Try logging in to a different exchange next time?
At the moment it's trying to level out at $170 (that bit written about 8 hours after the dump). I'm still smiling. That's not bad at all! It takes us back 4 or 5 days of the crazy speculators bitcoin bubble. Back to something looking like a more realistic current value. (I still think it's a bit high actually!)
Anyway!
Today it's "this is a joke of a currency" on Twitter, as after a few hours a few began to admit it wasn't about to reset to zero.
History lesson time!
America introduced the dollar back in 1792 and pegged it to the value of silver originally. So that's not the same as bitcoin. If you want a better equivalent to trying to introduce bitcoin, then you need to look at the rise of the paper dollar. That's where the system makes a leap of faith to a non precious metal backed physical thing.
So what happened then? Well between 1777 to 1788 they had a go at it, but it got counterfeited so often that it vanished again as worthless. Cough. Yeah. That happened to dollars. It didn't happen to bitcoin. Ooops!
In 1878 they tried again, this time with a bit more thought about "I promise to pay the bearer on demand", thus tying it in theory back to precious metal.
Here we go ...
Buying power of one U.S. dollar compared to 1774 USD
Year Equivalent buying power
1774 $1.00
1780 $0.59
1790 $0.89
1800 $0.64
1810 $0.66
1820 $0.69
1830 $0.88
1840 $0.94
1850 $1.03
1860 $0.97
1870 $0.62
1880 $0.79
1890 $0.89
1900 $0.96
1910 $0.85
1920 $0.39
1930 $0.47
1940 $0.56
1950 $0.33
1960 $0.26
1970 $0.20
1980 $0.10
1990 $0.06
2000 $0.05
2007 $0.04
2008 $0.04
2009 $0.04
2010 $0.035
2011 $0.034
As you can see, it's not been exactly rock solid stable even for a currency theoretically tied to gold. That early printing run seems to have put a dent in around 1780. I'm trying not to look at the bottom of that table. I would love to see the best data available for 1774 to say 1784. I'm willing to bet it didn't cruise in to existence with no jitters whatsoever, and that's for a currency where exchange would be very slow and difficult compared to bitcoin.
I don't think any currency has an easy time achieving acceptance. Guess all I'm saying is that the bitcoin haters are making comparisons with existing, established forms of exchange. Bitcoin is still very much in the initial uptake stage so volatility is going to be high to begin with.
What bugs me about the bitcoin haters is that they portray themselves as knowledgeable and trustworthy economic scholars. They then just dismiss a new economic phenomena happening right under their noses because they fail to understand it. I'm loving this as a unique chance to see raw finances in action. It's testing my abilities to predict support and resistance. It's not chopped to bits by HFT traders, manipulated by a central bank or played by whales. It's a lesson in raw non-manipulated supply and demand that we haven't seen for decades. Even if you think it's going to fail, it's still fascinating to watch and learn. It deserves that much recognition at least doesn't it?
Hey stupid traders on Twitter?! Bitcoin didn't die today. It is not tulips. You don't understand it.
I'm laughing at some of you guys. It's like watching granddad struggle to understand why on earth anyone would want a mobile phone.
Say hello to the financial guru's I call granddad. Please speak loudly and clearly and don't worry too much. Maybe granddad just doesn't need a mobile phone. So @zerohedge @chrisadamsmkts @ReformedBroker @MNYCx @MonetaAdvisors and many many more, we salute you granddads. And some of us laugh at you a bit as well.
"We're very skilled traders with a huge knowledge of complex sounding financial things and we make money on financial predictions ... except we can't understand bitcoin for what it is, or predict what it does".
The morning after the crash? Granddad has forgotten calling Bitcoin tulips for now. Granddad is now calling it a penny stock. Closer! Almost! Keep trying! Maybe admit you were wrong?
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