Feedback Friday
by Jeff Berwick, Dollar Vigilante:
BITCOIN PLUMMETS
Dear TDV,
What happened with Bitcoin this week? It went from a high of $265 to nearly $105 before bouncing around between $110 and $170? Is it over? – Pappy
Jeff’s Response: Hi Pappy, Don’t believe the hype. Bitcoin isn’t “over”. In fact it is just trading at the same level now that it was trading at last week. Hardly cause for panic. That said, despite my having told TDVers to begin to get into Bitcoin nearly two years ago at $6 I’ve always said it will be a volatile ride fraught with risks that most state-coddled and unadventurous people can’t handle. The biggest issue is that Bitcoin is still a very small market. At today’s close near $120 the total outstanding value of all Bitcoins is $1.3 billion. Compare that to other currencies in which it competes like the US dollar. The total amount of dollars outstanding is approximately $3 trillion. So, Bitcoin has a total valuation compared to US dollars of 0.043%. It is a much, much smaller market and because of that any major swings in sentiment or demand and supply can move it dramatically. If all Bitcoin owners were to sell at today’s price, Bill Gates could buy them all with his pocket change.
2013-04-12 16:30:05
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