So says Bitcoin’s executive director, Jon Matonis as
reported by CNN. Now, I’m sure that bit of information, combined with Matonis’s further advice
that “You should only invest in trade what you can afford to lose,” is very
comforting to people who used Mt. Gox to store their investment.
In other words, the executive director classifies bitcoin as
an extremely risky investment, not a monetary store of value. I suppose that’s
obvious for anything which has had its value jump to over $1,000 and
subsequently slump to under $600. Notice from the chart below that this is not the
first slump since Bitcoin went stratospheric. Also notice since Mt. Gox’s
demise that bitcoins have been trading higher. I suppose you could attribute
that to classical economics: since the supply of bitcoins has decreased, all
other things equal, the price should go up. Alternatively, you could view it as
whistling past the graveyard.
Mt. Gox has filed for bankruptcy protection in Hong Kong, so
perhaps their account holders will receive pennies on the dollars for their
accounts when the debacle is finally resolved. Apparently even before Mt. Gox
was hacked and “lost” 1.5 million bitcoins, they were under financial pressures
that should have been sufficient to alert investors that the exchange was
unsustainable. Again, according to CNN it appears Mt. Gox’s 2012 revenue was less than $400,000 and its expenses
included $5 million seized by the U.S. government for alleged false answers on
bank documents.
All of that was news to me because I had no reason to follow
Mt. Gox. However, those with bitcoin “investments” are now surely warned (if
they weren’t before) to perform careful due diligence of the organization
holding their bitcoins.
Bitcoin’s Jon Matonis thinks in five years bitcoins will be
mainstream, with apps that are as easy to use as Skype. That comparison is not
fully reassuring to me. In the meantime, may the Force be with you and your bitcoins.
I’ll continue to enjoy the action from the outside looking in.
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