I have to admit I, thus far, have been the ultimate Bitcoin cynic. Watching the price go from $2 in the fall of 2011 to $1132 in December 2013 was dizzying. It seemed reminiscent of Dutch tulip mania. A bitcoin that is not backed by anything physical such as gold, or by a government, strikes me as only slightly less valuable than a tulip.
My son is a big Bitcoin fan. I told him that for old guys, like me, the bank tax is worthwhile. My favorite example is my Visa card. I pay it off every month so I’m immune to the usurious interest rates. I really like the fact that I get fraud protection for free. I like the fact that I get an email every time something is charged to my account. I like getting miles.
However, I am changing my tune. This is mostly because of my dislike of the banks.
Why I hate the banks
I recently applied for a home refi. I get the fact that regulations are tight and banks can’t make risky loans. I did a refi a couple of years ago with Quicken. The amount of information they require you to provide is painful. My expectation was set, and I was willing to grin and bear it. However, the refi with Chase took unreasonable to grandnew levels. I can’t imagine a less risky loan proposition than I presented. I finally said “no more” after the third round of requested documentation.
I read about Wall Street traders complaining because their bonuses are only in the small millions of dollars. This irritates me because these people add zero value to society. Why can’t these brilliant people actually make things?
Am I alone in thinking, and hoping, that the banks in their current form go away? Have you heard of peer to peer lending sites such as Lending Club or Prosper?Why not borrow from your peers at a cheaper rate than you can get from a bank?
How about IPOs? Investment bankers (underwriters) make millions. Morgan Stanley, and others, made $100M on the Facebook IPO. It’s too bad Facebook didn’t use the dutch auction that Google used for their IPO, and pay the bankers zip.
Back to Bitcoin
It continues to amaze me that Bitcoin has persevered through so many obstacles. These obstacles are many, but a few include:
“China has barred all financial institutions, such as Baidu, from handling Bitcoin transactions. In addition, the Russian prosecutor general announced on Feb. 6, 2014, that the use of Bitcoins and other digital currencies is illegal under its current law.”
You also can’t stop reading about the stolen, lost, or confiscated Bitcoins from likes of Mt Gox and Silk Road. See Business Insider’s article on $500 Million Worth Of Bitcoin Has Been Stolen Since 2010.
However, in the face of all this adversity, it seems the price of Bitcoin is starting to stabilize. California has lifted it’s ban on Bitcoin.Some very smart VC such as Andreeson Horowitz, Union Square Ventures, and Tim Draper are into Bitcoin in a big way. Coinbasehas come out with a secure Bitcoin wallet, so hopefully many of the thefts are behind us.
If you find getting started with Bitcoin a little daunting, check out https://trybtc.com/. It will walk you through the process, and make it a little fun.
If the price of a Bitcoin dips back down below $600 (it’s currently $635) I may buy some.