dollarvigilante.com / Chris Horlacher / December 10th, 2013
A lot of attention has been paid to bitcoin in the last couple of weeks. As Chinese buyers piled in to the market, a gathering of bureaucrats in the United States gave their blessing to the nascent currency. The price movements in bitcoin have been jaw-dropping, to say the least. The naysayers, looking for any reason to belittle this digital innovation, leaped on a Bank of China announcement that prohibited Chinese banks from dealing with the currency. To those that have been paying attention, China has had a ban on virtual currencies since June of 2009 so this comes as no surprise. Other investors and speculators are painting pictures of tulip bulbs for us in the mainstream news, but even the Dutch didn’t see action this intense. Like Rocky Balboa, this new invention refuses to stay down.
So after making parity with gold, retreating and immediately recovering to what still feels like rarefied new heights, the next logical question is where does it go from here? Bitcoin millionaires are being minted by the hour and they will be leading the development of the bitcoin economy. Already we’re seeing numerous retailers adopt bitcoin as a system of payment and even if they don’t want to hold bitcoin themselves. Services like Bitpay and Coinbase allows them to access a market segment commanding over $11 billion in purchasing power. The message is clear; businesses want bitcoin and they’re willing to give you stuff in order to get it.
Bitcoin’s current valuation may seem high today, particularly when compared against many corporations. A single bitcoin is worth more than a share in Apple, once the darling of the NASDAQ. But bitcoin isn’t meant to be equity. It, like gold, is a currency and should be analyzed as such. Compared to the world’s major currencies, bitcoin still has a long, long way to go before it could ever rival them.