There seem to be all sorts of shenanigans involving Bitcoin. There’s this story about a company making software to prevent cheating in online gaming, actually using its customers’ computers as a botnet to generate Bitcoins.
What seems exceedingly obvious is that since Bitcoin’s value is wildly unstable, it’s useless as currency. Part of the trouble is, I think, it is intended to be a deflationary currency, which would mean that at any given moment, it would be more rational to hoard Bitcoins than to actually exchange them for goods and services; this is heightened by the fact that Bitcoin’s developers always expected it to be a secondary currency, with more limited use than government-sponsored currencies, which are inflationary. Thanks to Gresham’s Law, this means that Bitcoins will tend to drop out of circulation, further exaggerating the deflationary trend.
Speculators love commodities that are assumed to increase in exchange value over time, because for any purchase price, they can claim that the commodity’s exchange value will eventually exceed it.
The upshot of this is that it’s a natural outcome of the design of Bitcoin that it’s the subject of speculative bubbles.
What’s most astonishing to me is that, as far as I can make out, much of the enthusiasm for Bitcoin as a currency is based upon looking at the history of conflicts about currency in the 19th Century, and concluding that the 19th Century didn’t actually happen.
