Bitcoins, an online based currency developed four years ago by a nerd in his mother’s basement, has lost 75% of its value in 2 days. In the last month the exchange rate for the digital currency skyrocketed, trade at 47 USD per Bitcoin in March to 266 USD last Wednesday. But that was as high as it may ever likely trade at again. The Bitcoin bubble is an excellent example of what a trading bubble is like on crack. The boom and bust of this all happened in less than a month, suggesting that the volatility of this currency is will spell then end of investors intrest in it.
This doesn’t mean that Bitcoins are out of the market completely, or that anyone who traded with them is an idiot. In fact I am sure some people made a good chunk of change on this bubble. There are those who traded early last month and road the bubble to the peak or maybe a little below then sold which then caused the value to plummet from under his fellow investors. There are some very cunning individuals who might have used their coins to buy assets or stable commodities that can be traded back after the market stabilized or turned into another investment. Like this guy who bought a Porche.
The good news here is that there is not a Bit nation where peasants will be suffering from this disaster. Usually when there is a currency crisis a whole nation of people is left to suffer in the devastation caused by the hubris of the few. So luckily no children will be starving because mom dosen’t have enough Bitcoins to buy a loaf of digital bread. In this case the only losers are those invested large amounts in Bitcoin and now can’t find a buyer, like the guy that sold his Porche.
However there are those who still believe that there is utility and value in the Bitcoins, albiet not in the way investors hoped. As an investment Bitcoins turned out to be the 21 century answer to the tulip bubble. As for the actual legacy of Bitcoins, the jury is out.