The Consumer Financial Protection Bureau, that whipping boy of big-business conservatives everywhere, demonstrated its value to the average consumer this week by explaining the pitfalls of bitcoins and other such “virtual currencies.” Indian families, who lived in fear of being evicted from the country and their livelihoods by the Kenyan regime, would build up a nest egg overseas, and the foreigner would double his take of shillings.Ī timely warning from the feds: Bitcoins are the ‘Wild West’ The system served everybody, except obviously the government. or Canada for deposit there, and thereby spirit dollars out of Kenya in contravention of the country’s strict foreign-exchange regulations. He’d mail the check to a relative in the U.S. bank in return for black-market shillings. This derived from my sojourn as a foreign correspondent in Nairobi in the 1980s, when the official exchange rate was about eight Kenya shillings to the dollar.Įxperienced foreign residents wouldn’t think of buying shillings at the official rate they’d want the black market rate, which was closer to 16 shillings to the buck.Įxpatriates wishing to obtain the better rate would wander into a grocery or ice cream shop owned by an Indian merchant and write him a check in dollars on a U.S. Bitcoin fails three of these tests - it’s not stable in value, widely accepted or 100% liquid.Īs I’ve written in the past, the key test bitcoin passes is what we might call the Kenya storefront test. Blogger Kevin Drum lists five features that a currency should have: It should be hard to counterfeit, stable in value, easy to carry, widely accepted and 100% liquid.
The problem is that as bad as bitcoin is as an investment, it’s even worse as a currency. But there have been 16 of those since 1926, averaging one every six years - not three in a single year.īitcoin fanatics, however, don’t really pitch the cryptocurrency as an investment vehicle. It’s true that the stock market has been no stranger to bear markets, defined as drops of 20% or more. This year alone there have been three downdrafts of 20% or more over the course of a week or two, and an additional fall of 16% over 12 days in March. Late last week, I noticed a spike in what we might think of as a certain financial index.įrom Dec. If you hung in with bitcoin from, say, 2013, when the cryptocurrency first swam into public consciousness and was priced at a few hundred dollars per coin, until today ( current quote on Coinbase: $53,924.99), you made a mint.īut how many people did that? To have stayed in the market for those eight or nine years, or even for a sizable fraction of the period, you would have had to survive not one, not three, but countless bull and bear waves.Ĭolumn: Bitcoin’s price hit $5,000 last week. They’ll point to the latest surge in price and chortle at the folly of advising people to shun bitcoin at $600 when it’s now $20,000, $30,000 or (as it has been recently) $50,000. Every so often someone, often on reddit, dredges up one of the columns I’ve written about bitcoin over the years, invariably counseling readers to be wary of investing in the thing.
Bitcoin - a financial instrument created by computer algorithm and valued essentially at what anyone is willing to pay for it - is arguably immune from that sort of tinkering.Īs an investment, bitcoin has been wildly oversold by its fan base. You may occasionally receive promotional content from the Los Angeles Times.īitcoin’s fans say it’s an alternative to traditional currencies, which can be manipulated by national central banks to manage (or mismanage, if you prefer) their economies.
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