Political Metals

Oh look, pretty graphs regarding bitcoins, oh what fun! Now, let us take this to the next level up, and read this: http://www.schneier.com/blog/archives/2012/10/analysis_of_how.html

In particular, look at how bitcoins are traded, and how all major transactions seem to be related to just one biggie, which took place in November 2010 and was immediately followed by a set of actions which would, with a normal currency, have obfuscated the transaction completely but which due to how bitcoins work, did nothing of the sort. This therefore tells you a very great deal about how the bitcoin currency started life, and the rest of the paper is similarly informative.

Put simply, something shady happened in Nov 2010, and whoever did it tried to cover it up. The person who did this did not understand how bitcoins track transactions, ergo the main actor wasn’t the bitcoin inventor but someone else, a banker or criminal even.

Secondly, most of the bitcoins ever made are sitting in the accounts of nerds and are completely static and inactive. Quite a lot may well have been lost due to sloppy back-ups and the like; there was only ever a limited number of bitcoins, so great galloping deflation is the rule in the bitcoin world and as I say, only a very small percentage of existing bitcoins are in use.

Bitcoins are therefore very iliquid and are increasing in real value quite rapidly. As such, they are a poor way to measure actual value, as well as being shady as all hell and heavily involved in dubious activities of all sorts. Me, I’m deploying my Virtual Bargepole on this one; infinitely long, guaranteed not to touch anything at all.