Bitcoin Bust?

I have never understood bitcoins and why they aren’t Monopoly money that people choose to take seriously, because why. But then, I could argue that “real” money is no different. Finance is an elaborate fantasy, as far as I’m concerned. It affects us only because we’ve all agreed to play along.

I take it bitcoins have a libertarian appeal, in that they aren’t subject to awful government regulation or taxes. But then, aren’t these the same people who want to return to the gold standard? Whatever.

Apparently hackers have been draining a major bitcoin site for months and redirecting millions of actual dollars’ worth of the whatever they are, amounting to 6 percent of all the bitcoins in the world. So lots of people have lost a ton of money, or “money.” Because they are unregulated, they are also unprotected.

Paul Krugman:

Bitcoin was, of course, created in part to cater to libertarian dreams — to provide a way to store your wealth where governments can’t steal it through taxation or currency debasement.

And it’s true! Thanks to Bitcoin, you can instead have your wealth stolen by private hackers.


The Austrian-school-bots at Reason think this is just a minor setback for bitcoins. And if enough of them think that way, it probably is, because it’s all Tinkerbelle. Bitcoins will live as long as there are those who believe.

28 thoughts on “Bitcoin Bust?

  1. P.T. Barnum was seriously off when he postulated the number of fools born every second/minute.

  2. At least the money stands a chance of having gone to someone smart and not just hired on Wall Street because of family connections and going to the right school.

  3. “Bitcoins will live as long as there are those who believe.”

    That is the essence of currency of any type – money is just a way of valuing items for exchange so one doesn’t have to take the actual chickens to the doctor (shades of Sharon Angle). It has to be regulable and rarish (thus gold made a good currency medium, because of its rarity). But, currency is not money. Money is the value represented, currency is the medium of exchange of that value. Gold bugs comingle the two ideas. More later.

  4. “The Austrian-school-bots at Reason”

    If ever a website was antithetical to its name! What a cesspool that joint is, I do believe it is lower than World Nut Daily! Yes Bitcoin “governments can’t steal it” when did paying taxes become equivalent to being robbed? Fucking Freeloaders!

  5. But lay up your bitcoins in heaven, where neither moth nor rust doth corrupt, and where thieves do not break through nor steal.

    I guess the Winklevoss twins are on red alert. 🙂

  6. I know bitcoin “mining” requires tremendous processing power, and thus uses tremendous amounts of energy. What I’m not clear on is whether all those servers are doing anything useful other than making bitcoins, but it’s still a terrible idea for that reason alone.

  7. I remember the good old days of building wealth through Plaid Stamps®.. In those days you had something tangible that you could paste into a book and be certain that nobody was going to rip you off for your Plaid Stamps® .

  8. I’ll tell you a story: A good friend of mine bought a couple of hundred dollars worth of bitcoins because he wanted to play in an online investment market with pretend internet money that he wouldn’t mind losing. He was hoping to gain a bit of harmless educational experience with investing, and the bitcoins were a somewhat silly but fairly inexpensive geek-toy — like how you might buy some chips in Las Vegas and then happily write them off when you lose.

    So he played with his toys for a bit, then forgot about them, then a few years later he discovered they were suddenly worth a few hundred thousand dollars. Of course he sold out instantly, because he isn’t stupid, and a bubble like that was guaranteed to burst. Turns out, though, that if he’d been stupid, and held on to them another few years, they would’ve gotten up to around $8 million.

    Bitcoin, in short, is an investment that in recent memory has lavishly rewarded the foolish and gullible (and the occasional bright person who stumbled into it by mistake). That’s pretty much the only explanation of the phenomenon that you need. Fools will cling as long as they can to a story where foolishness pays better than acumen.

  9. OT, some more Hiltzik, Forget ‘House of Cards’: Watch a Real Reporter Sweat a Politician.

    …This is how a real journalist goes about his job. It’s the most professional, effective interview of a politician we’ve witnessed in our decades in the business. No histrionics, but brutal in its impact. It should be screened for every journalism class in the country, as well as every newsroom and not a few writers’ rooms in Hollywood. (Are you listening, “House of Cards”?)

    Pay special attention to how Carpenter [the reporter] hauls Wolf [the politician] back to the subject at hand when the candidate tries to distract him with baloney. On “Meet the Press,” they would have accepted Wolf’s defense that this was all aimed at “educating” people about the consequences of evil and then moved on to a commercial.

  10. Hey Swami,
    Remember back in the day, the stamps that came on the packs of certain cigarettes?

    Over time, and carton’s smoked over those years, they allowed you to buy valuable prizes – like blenders, TV’s, and iron-lung machines?

  11. Plaid Stamps®

    They were “Green Stamps” in my neck of the woods, but they were just as precioussss…. I remember my great-uncle pasting sheets & sheets & sheets of them into the little books. And I remember going downtown with him to redeem them. Only 500 books and we went home with a brand-new toaster! America, what a country!

    As for bitcoin, twice I’ve watched the episode of The Good Wife, “Bitcoin for Dummies,” and I still don’t understand the concept. (Perhaps if it had been titled “Dummies for Bitcoin”?)

    But I have noticed we don’t hear anything about Ron Paul’s beloved “Ameros” anymore.

  12. In a phrase, bitcoin is another Ponzi scheme. If you got in early, you made out. Right now, we are in a boom-bust mode, where every time someone finds a way to use bitcoins for an illegal purpose on a big scale, the value goes up, then drifts back down when those transactions are completed, or crashes when yet another scandal erupts. Eventually, people will finally realize there is no “there” there. A real currency is backed by the ability of the country issuing same to tax its people – bitcoin has no such legitimacy.

    Or, if enough people inhale the fairy dust, it may actually get a critical mass of popular support to become what it purports to be. No matter what, the people who mine the bitcoins (create them out of thin air) will make out and drain another amount of wealth out of the system.

    One of the reasons that on-the-ground inflation is so low under conditions traditionally inflationary is that the people who have gamed the system are not spending the money they have extracted out of the economy, but are putting it into the stock market instead, inflating that. Much more money goes to the top 0.1% than any other time in history, and those people really do not spend any significant fraction of their accumulated wealth except on political ads to acquire more wealth. Without that bulk of money circulating in the economy, inflation cannot occur as predicted by the amount of money that has been created.

  13. “They were “Green Stamps” in my neck of the woods”

    I remember them as S&H green stamps? Man you guys are old!

  14. I think what gets lost about Bitcoin is that it’s a commodity (like gold. Or tulips), whereas a sovereign currency, such as the dollar, is what you use to pay your debt to the government (taxes). The Treasury won’t accept bitcoins as payment (though they may confiscate property holdings, including bitcoins, and then auction them for currency). So it’s dollars or jail, though I have no idea what would happen if tens of millions of Americans went on a tax strike (you couldn’t arrest all of them).

  15. I don’t know that much about bitcoins, but I know enough to stay away from them. And not only that, the Repugs have provided me with an assurance insurance guaranteed to keep me from dabbling in the bitcoin market place.. It’s a unique policy specially tailored in 2008 for the low end of the middle class who couldn’t keep up with the herd. It’s a policy called abject poverty.

  16. gulag…Yeah, I remember them.. Raleigh coupons. My first girl friend’s grandparents both used to smoke Raleigh’s and they had bundles of coupons wrapped in rubber bands laying all over their house. Old Doris and Al.. What a pair those two were. Actually they weren’t married. They were just shacking up, long term. But seeing that they were so old at the time it didn’t carry the same social stigma that young people faced in those days. Kinda like their devotion toward one another covered their sin.

    • It’s a setback much the same way trading mp3′s was affected by Napster shutting down.

      People don’t lose their fortunes trading mp3s. Who would be so stupid to continue to invest tons of money into something that can evaporate that easily? Oh, wait, libertarians. Never mind.

  17. According to Reason, bitcoins are worth 5 times what they were last year. So what was created that was worth that extreme profit? If it can go up that fast, can’t it go down just as fast? The bubble economy bust we are in was triggered by artificial wealth in real estate, the fact that a house was ‘worth’ far more that the value of the land and the lumber to make it. The great depression was caused by a bubble in the stock market – stocks were trading ridiculously higher than the value of the companies, whether measured by assets or potential profit. Arguing that the bitcoin fad has blown up into a huge ‘bubble’, which is what Reason has said in diferent words, with a five-fold increase in value should scare an investor in a unregulated market. But greed will overcome wisdom. Those in the know will sell at the peak – the rubes will get stuck with the loss,

  18. WOW! Plaid Stamps. That takes me back. The South Side of Chicago had both green and plaid stamps. Dad and Mom had stacks of books. I think there was a store where you could go pick out stuff.

    That was a very long time ago.

  19. It brings to mind the scene at the end of “The Treasure of Sierra Madre” where The wind rises and the gold dust is blown off into the sand with the unhinged characters looking on.

    Of course, I win the Darwin award for buying “Bitcoin Savings Bonds” from a guy in the parking lot of our local blood bank. It should have tipped me off when the 1000’s had pictures of Fabio on them.

  20. goatherd,
    Never buy “Bitcoin Savings Bonds” that don’t have Ayn Rand’s or Alan Greenspan’s pictures on them.
    Though I hear they may be adding Rand Paul soon.

  21. I always wondered why the protagonists didn’t just pan the sand and recover the gold, like they did in the first place. They knew where it was, it was concentrated, would have been a couple days of effort… (Treasure of the Sierra Madre)

  22. Dan, Dare I say it? You might just have a sequel there!

    You are right CUNDgulag. The bonds with Ayn Rand’s picture are particularly useful in the kitchen when a recipe calls for curdled milk or for display in a “time out room” if a child is particularly difficult. Proper restraint should, of course, always be observed.

    The Greenspans are useful when guests linger too long at a party. A soporific can often convince them that it is time to “knit up the raveled sleeve of care.”

    Oddly, I live in an area of NC that, prior to 1849, was the largest producer of gold in the nation. We have two streams on our property and I found out a few years ago, that there was an old gold mine just a few hundred yards from our house. I always promise myself to try panning, but, somehow, it never happens. Who knows, I might be able to corner the bitcoin market!

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