Bitcoin the Bit-con: Avoid the Bubble, Stay High and Dry

Chart: look at this chart: it CRASHED then bounced. Bitcoin confidence has been shattered.

MORE DEVELOPMENTS:

* THE HISTORY OF EVERY TRANSACTION OF A BITCOIN CAN BE TRACED.

*  " Satoshi is a nom de guerre, as far as gavin andersen is concerned".**

*  "Gavin said in an interview that he's never seen nor spoken with satoshi."**

** 'briareus' irc.freenode.net

What is Bitcoin?

I am sure that many people are wondering themselves, just what is bitcoin? There are many people watching, but many fewer are participating. This has been an extraordinary fad for this year, and especially during the month of June.  What are the dynamics behind this, what seems to be a bubble? We can only speculate. How long will it last? That again, we can only speculate.

"Be fearful when others are greedy. Be greedy when others are fearful."

"Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it."

"Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can't buy what is popular and do well."

Those are just a few timeless Warren Buffett quotes. When it comes to fear and greed, it takes a lot to distance from the emotional side of the investment and not participate in foolishness when it is rampant, as with the shares of bitcoin (and other schemes of the sort).

Performance:

Bitcoin has gone from a low of  6 cents ($.06) to a record high of approximately $31.50 per bitcoin. This has all happened in less than 2 years time. If you work out the calculations, this has an increase from the low to the peak of 52,400%

For those people who bought massive amounts of bitcoins at $.06 per bitcoin, they will have made a handsome sum for taking on that risk. Not many times can someone increate their investment 500 fold. This is a 500-bagger, and anyone who has even anything close to such a profit, should take the profit.   If there is not a competing bitcoin currency, you can BET that there will be in the future.

Bitcoin is a digital currency created in 2009 by Satoshi Nakamoto. Unlike other digital currencies, Bitcoin avoids central authorities and issuers. Bitcoin uses a distributed database spread across nodes of a peer-to-peer network to journal transactions, and uses digital signatures and proof-of-work to provide security functions, such as ensuring that bitcoins can be spent only once per owner and only by the person who owns them.

Bitcoin vs USD exchange rate starting near the first big documented growth spurt on 2010-10-07. Prices range from about $0.06 to about $19. The vertical scale for price (right) and volume bars (left) is a log scale.

Tuesday-Wednesday Price Action

The price rose from about 19.00 per bitcoin to a price of 31.50, before PLUNGING back down to about 25.00 per bitcoin. Remember, these things are EXTREMELY THINLY traded. A few shares get traded back and forth, and the price leaps up with extreme volatility.

Also remember, this is all happening when the Dow has plunged nearly 800 points, and the US Dollar is in the process of bottoming, as I reported here earlier.

http://www.street-finance.com/story/bottom-in-the-usd-soros-attempts-to-top-tick-gold

Market Valuation

There are approximately 6.47 million "bitcoins" in existence at the time I am writing this article. With a commanding price of 29.00 US Dollars per bitcoin, this brings the market capitalization to approximately 190 Million dollars.  Yes, 190 million dollars for a currency that has no intrinsic value.

Does that sound crazy?

Popularity on Freenode.net

Bitcoin channels have been extremely popular on the open source IRC server Freenode. One perplexing thing is that 4 of the top channels are related to Bitcoin.   Predicting a top or irrational exuberance peak in this cyber-currency is extremely hard, and maybe that is the reason it has not topped out yet. The blow-off top should be soon if not now.  There is no liquidity for the coins. Only 5,10, 20 coin lots are being moved at a time. I see just traders who are young and maybe software developers who are out of work that are trading these small lots on credit cards.

Online Poker Ban and Flashbacks to CMKX

This is very reminiscent to the classic ponzi scheme "CMKX".  Another strange phenomenon was that the recent price surges were DIRECTLY congruent with the ONLINE POKER ban, which resulted in the take down of 3 of the largest poker sites on the internet. COINCIDENCE? I think not.

The bottom line, is that you get a bunch of bored poker players, programmers, and kids out of college without jobs, with a real unemployment level of 23%, and stuff like this pops up.

Time will tell if this is a correct analysis of the situation, but you can bet that a 50% rise in 48 hour period might indicate that things are heating up a little.

Massive X-Class Solar Flare That Knocks Out the Power Grid

Can someone explain to me what happens if an event like this happens? What will Bitcoins be worth then?  What about Gold and Silver?

A mushroom of cooled plasma popped like a pimple and rained onto the surface of the sun yesterday-shooting perhaps the largest amount of solar material into space ever seen, scientists say.

The solar flare-an unusually bright spot on the sun-wasn't surprising as a "moderate" event. Space observatories in the past year recorded about 70 such solar flares, each roughly ten times weaker than "extreme" flares, of which only two have occurred since 2007.

Junk Silver

I would take junk silver any day of the week over bitcoin. When the musical chairs stop, you don't want to be holding a bag or wallet full of virtual bitcoins. They can be vaporized if you don't have a backup hard drive.

I would love to get feedback about Bitcoin. Please Email me, I would love to hear opinions!

John Chalekson

sitevc @ gmail.com

Http://www.street-finance.com