We need to be careful in distinguishing momentum-junkie gamblers who are speculating in bitcoin from investors and savers who have used it to store a small amount of capital from merchants who are willing to accept bitcoins as payments.
Bitcoin speculators/gamblers are similar to the folks who have been trying to ride the current #PotPennyStock frenzy to wealth or any other type of currency speculator who is blindly gambling on short-term price movements, often using borrowed money.
Then there are those folks like me, as I fit into two of the above categories. I’m an investor/saver who has put a tiny bit of my savings into bitcoin back when it was trading in the double digits, not hundreds or thousands of dollars for each. As I noted at the time, putting one-half of one percent into some bitcoin to help diversify and hedge away from the drunken Federal Reserve/Republican/Democrat Regime dollar printing schemes and the impact of the ongoing currency wars that I continue to write about.
“But, how can you possibly consider bitcoin a store of value when it has such wild price swings?” I’ve seen this question from bitcoin skeptics on Scutify, Marketwatch, Twitter, and everywhere else I’ve ever mentioned bitcoin. My best answer, put simply, there is value in knowing that I have means of exchanging value as measured in other currencies using bitcoin.
And I’ve long accepted payment for my TradingWithCody.com service in the form of bitcoin, and I’ve simply moved the price that I charge as the price for bitcoin swings. Long ago, I charged one bitcoin per month for my service if I’d ever wanted to, I could have immediately converted those bitcoin payments into dollars at whatever the current rate of bitcoin to dollars. Nowadays, I charge two bitcoins per year for the service. When bitcoin was around $1000, I was charging simply one bitcoin per year for TradingWithCody. Pretty simple, really, yes?
As Marc Andreesen, who just started following me on Twitter yesterday by the way, noted in his excellent write up of bitcoin from last month’s NYTimes called Why Bitcoin Matter, has explained:
“The criticism that merchants will not accept Bitcoin because of its volatility is also incorrect. Bitcoin can be used entirely as a payment system; merchants do not need to hold any Bitcoin currency or be exposed to Bitcoin volatility at any time. Any consumer or merchant can trade in and out of Bitcoin and other currencies any time they want.”
I’m one of those very merchants, and I have indeed converted bitcoin payments into dollars which I then used to pay bonuses to my employees who wanted their year-end bonus last year in dollars rather than bitcoins.
The upshot, for me and my perspective and my risk-tolerance and my businesses, is that I was a very early adopter of bitcoin and as a result, I’ve been a net seller of my own bitcoins and the payments I receive on TradingWithCody in bitcoins for the last few months, as I’ve noted in my columns repeatedly.
As I noted in this week’s Revolution Investing newsletter, I was shocked when during my presentation at the NYC Trader’s Expo, I asked the crowd if any of them had ever bought or owned any bitcoins.
None had ever bought a bitcoin, though several of them raised their hands when I asked if they’d even considered buying a bitcoin or two at some point. I would have thought that at least a few of the people here at a MoneyShow Trader’s Expo where you’ve got presentations and booths that try to help people learn to trade forex currencies and precious metals like gold … that at least a few people would have been speculating on the bitcoin frenzy. Alas, even though $BTC is often the top most-trending ticker on Scutify, bitcoin wasn’t even a side note at the event, which means it still has a long ways to go in becoming a mainstream currency or even as a mainstream speculation vehicle.
If you’re wanting to speculate on near-term bitcoin price swings, good luck to ya’. If you’re wanting to hedge a tiny bit of your capital outside of the nearly 200 available governmentally-controlled currencies, then start small and use the short-term price swings to add when bitcoins crash. And if you’re a merchant, then get on the bitcoin train by immediately starting to accept payments in bitcoin and then immediately having those bitcoins turned into dollars and use the dollars you receive just like always.
Which leads me to the final point here. There is certainly a possibility that bitcoin gets truly destroyed by pirates or by a better, future digital crypto-currency. But as more and more merchants and their customers simply start using bitcoin to instantly transfer wealth to each other and make payments and as all the services and applications and developers that are right now at work to make that transfer of wealth even easier using bitcoin — well, there’s also the possibility that bitcoin holds its value because it is such a good means of exchanging value that the self-fulfilling cycles are commencing in front of our eyes.