Today’s been a big day in the Bitcoin world. For me, it’s been punctuated by people calling and texting, asking what I thought of “the drop” and how it feels to have a portion of my ostensible net worth evaporate, but also, how can they buy more bitcoin now that the price has “come down”.
I don’t believe that the fundamental value of a Bitcoin has changed much.
To me, it is either worth zero, or it is worth a lot. It is either the financial revolution of the 2010’s, or it isn’t. If a Bitcoin is not worth a lot of money, it is worth zero. There’s no middle ground.
Everything on the charts is price discovery, nothing more. Given enough time, Bitcoin will eventually arrive at its ultimate destination: either the ground or the moon. What happens along the way is irrelevant, and so I don’t have much anxiety over it. I believe the end game is not the ground, so there’s only one alternate possibility in my mind.
MtGox for a long time has been a terribly inefficient price discovery mechanism. Quite simply, it hasn’t been an effective way for supply and demand to meet. It takes too long to get money in, and it’s perceived as risky to leave it there, so for a while it’s been a poor representation of the actual market supply and demand. The order book remains very thin on both sides, and sizeable trades easily wipe out the orders and distort the price in both directions.
The last time I sent money to MtGox was in January, and with all due respect to them, I had to pester them to get it posted, days after it had arrived. That doesn’t make them bad people, but I took it as a clue that they were way understaffed, all critical operations were to go through one or two guys, and they had no idea how to scale their operation, a business skill that must be acquired by someone with the right talent and doesn’t just come naturally. So if it’s that bad in January, it’s no surprise that with the explosion in popularity in April, that they can’t handle it. Hey, I had the same problem – look at me and Casascius Coins.
The charts vary in saying that Bitcoins are worth anywhere between $55 and $155. But I know of nobody looking to sell at any of those prices. I do know plenty of people who would love for me to pick them up some Bitcoins if I come across the opportunity to buy them cheap. Bitcoinstore.com appears to remain open for business and seems to be accepting 1 BTC at no less than $84 each time I have checked. You would think that if BTC were suddenly worthless, they’d just stop taking orders.
It is very nice that this time around (unlike June 2011), people recognize that MtGox is not Bitcoin, and that the Bitcoin network is functioning just fine in the absence of a working MtGox. There are enough steady hands out there that realize that this will all get sorted out and, even if MtGox doesn’t survive, Bitcoin isn’t going away.