Because hey, why contain all your crazy theories to gold when you can expand them to the new psydo-currency?
For those of you unfamiliar, let’s take a quick look at what the actual hell a Bitcoin is. It’s a new currency created by a process called mining, which is essentially exchanging computing power (to process transactions and junk) for more Bitcoins. They’re kept in online wallets which are, at least compared to traditional bank accounts, supposed to be more secure than There’s a limit to how many Bitcoins can be produced, they’re about half way there.
I think this whole Bitcoin thing is more stupid than Jenny McCarthy talking about vaccines. Bitcoin is supposed to be this alternate currency, something that can’t be manipulated by governments or central banks. While this may be all fine and dandy in theory, reality is much different. People are speculating like crazy in Bitcoins, and it’s lead to price charts like this one. Does this look like the chart of a currency to you?
In the last year, the value of a single Bitcoin has increased from $21 (USD) to the current value of $949. That’s a return of a mere 4,419% annually. Yeah, that’s totally sustainable. If you guys need me, I’ll be selling my body for Bitcoins. (Ed. note: nice try, but you’d get about 0.0001 Bitcoins for your trouble.)
So to kind of summarize, Bitcoins are finite in number, are supposed to act as a “true” currency that can’t be manipulated by overzealous governments hellbent on ruining everyone’s lives with hyperinflation, and is liquid enough that investors can speculate on price movements. Does that sound like another investment vehicle that you’ve may have heard of? Go ahead and guess, I’ll play the Jeopardy music while waiting.
You probably guessed it, but here’s the answer in case you didn’t. (Scrolls back up to the title) Aww dammit. I already told you. It’s gold.
Back in 2008 when all the stuff hit the fan, the price of gold started to perform pretty well. By 2011, the price of the shiny yellow metal hit a high of close to $1900 US, as certain investors were nervous about the US Fed injecting all sorts of monetary stimulus into the economy (AKA printing money, and lots of it) and the weakness in Europe, which has since improved.
Aside: I told you to sell your gold back in May, 2010. I was a little early, but it’s not the worst call I’ve ever made.
As things have improved, the price of gold has come back down, to current levels of $1200(ish) an ounce. While emerging markets are currently contributing to a market correction, the developed world’s economies look pretty good. If you combine that with increasing supply coming on the market from gold miners who spent hard on property during the boom times, it’s pretty easy to envision a world where the price of gold is pretty weak for a while.
So what’s a crazy person who thinks every major currency is going to zero supposed to do, besides stock up on canned meat for their basement fortress and hope like hell for a major economic collapse that will ruin everyone but give that crazy person reason to gloat and isn’t that more important than things like easily being able to buy groceries? Good thing Bitcoin came along, so our buddy has something to do between episodes of Doomsday Preppers.
Bitcoin has become more than that, of course. People are using Bitcoin to make all sorts of speculations, including commerce on the internet and other stupid things. But ultimately, it’s not a real currency, it’s not even a good doomsday trade. It’s just some idiotic craze that’s caught on, and will be replaced as the flavor of the week by whatever comes after.
Just like when I told you all to sell gold, I’m urging anyone reading this who has Bitcoins to sell the damn things and exchange them for currency that isn’t weird. Or, better yet, you can just give them to me, and I will exchange them for Canadian dollars, which I will exchange for all the chips and dip. See, everyone wins, especially Nelson’s stomach.
I’ll leave you with a Warren Buffett quote on gold, which applies pretty well to Bitcoin too.
Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.