Bitcoin: Don't look back in anger -

Bitcoin: Don’t look back in anger

Colby Cosh on the downfall of the digital currency


Cool cutting-edge cryptocurrency Bitcoin faces difficult hours as its leading exchange vanishes from the internet in a puff of electrons, leaving investors writhing in terror. I take it as a bad sign that the heads of other Bitcoin exchanges have banded together to express confidence in the currency while distancing themselves from “the tragic violation of trust” and “the failings” of the elusive Mt. Gox.

As with any new industry, there are certain bad actors that need to be weeded out, and that is what we are seeing today. We are confident, however, that strong Bitcoin companies, led by highly competent teams and backed by credible investors, will continue to thrive, and to fulfill the promise that bitcoin offers as the future of payment in the Internet age.

And how are you, the Bitcoin hobbyist, supposed to recognize the strong, competent, credible Bitcoin exchanges? A lot of people are regretting their adoption of the “just pick the most popular/famous one” heuristic right now, which led them up to the death zone atop Mt. Gox. This may not be the end of Bitcoin, but it is visible from here.

Bitcoin is popular with libertarians who object to the monopolistic, coercive nature of state-backed fiat currencies. The “Joint Statement Regarding MtGox” is intended to rally that sentiment and, implicitly, to defend the value of Bitcoin—as expressed in units of what the Bitcoiners contemptuously call just “fiat.” By the U.S. dollar standard, each Bitcoin has lost 15% of its value in the last 24 hours.

This is actually quite an impressive performance. In my view, the recent rise of ironic and semi-ironic alternatives to Bitcoin (I can has Dogecoinz?) ought to already have done a lot more damage. Those who are grimly holding onto Bitcoins on not-yet-exploded exchanges are certainly displaying great courage.

Unfortunately, they are displaying the courage of an “ought” conviction in a world that operates on “is”. There ought to be alternatives to fiat currency (although it seems to me that gold works about as well as can be expected; perhaps there are gold-bugs who resisted and castigated Bitcoin all along, but I fear that the gold-bugs and the Bit-heads are mostly the same people). It is quite true that government money is coercive, and that governments often fail financially because they tend to attract the cowardly, the inept, and the power-mad.

But. Is money meant for moral posturing, or is it intended for the purchase of goods and services?

Bitcoiners fling the word “fiat” at dollars and euros and dinars and yen. The lesson slowly being taught by the struggles of the Bitcoin market is this: the fiat of a state is actually a pretty powerful and solid thing to have backing your paycheque, especially when the alternative is the promise of a few unseen individuals, perhaps ones dwelling in Bhutan or the Maldives. The government of Canada will force a creditor to take my Canadian dollars, and has undertaken, by definition, to accept them itself. Moreover, it does so at a rate which an independent agency uses vague, flawed measurements to hold steady in units of non-money stuff. The implicit slogan of every central bank is “Ahem, It’s Not Quite Just ‘Fiat’, Guys”. It turns out this all comes in handy when it is time to eat or pay the mortgage.

It may be wrong for me to avail myself of all this dreadful power by engaging in dollar-denominated transactions, but I am under no personal obligation to trust a particular flim-flam man, or someone indistinguishable from one, who claims to offer a more ethical alternative. His product might be unethical in many other ways. (One possible one: he means to run off to Guadalajara with my filthy fiatbux and leave me hanging.) And, anyway, I ultimately have to pay my own taxes in Canadian dollars.

If we all had to pay our taxes in blood, and don’t think The Man hasn’t considered it, we would probably have circulating notes denominated in pints. There would be critics of the blood-money system. Some, too good for this fallen world, would refuse to accept the blood-money under any circumstances. But it would be for them to choose some other reliable store of value, and at some point the government would track them down, and they would be obligated either to convert their private currency—or to bleed. In the meantime, they might be ruined many times over by incompetence or theft on the unsanctioned, coercion-free exchanges devoted to CleanCoins or Safe-T-Coins or LevitiCoins. It is never easy to be holier than thy neighbour.

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Bitcoin: Don’t look back in anger

  1. I don’t particularly see myself as a techie illiterate, but for the life of me I cannot see the point behind bitcoin other than as a pseudo world currency without any world.

    • This comment was deleted.

      • My IQ is somewhere north of 85, and I don’t get it either. A year or two ago I did visit Mt. Gox, after the very selection process Cosh describes, but the $50 minimum was too steep. $10 is my max for any lottery.

        And that’s the story of how Bitcoin nearly freed me of $10.

        • Bitcoin isn’t the problem, shady exchanges are. Thankfully I use paper wallets, so my money is safe!

          • Except for the fact that its purchasing power just got cut in half overnight. When was the last time that happened to the money in my leather wallet? Oh, right, never.

          • Yes, but the ones that we bought for $30 each just a year ago more than make up for the losses we have taken in the last few months. It is all good.

          • So why is Bitcoin any better than a penny stock from the pink sheets or some other venture exchange? The whole point of a currency is to provide a stable medium of exchange. At least with other highly speculative investments, there’s the possibility of actually owning part of something inherently valuable, whether it’s a mining claim or intellectual property.

          • You’re comparing a currency to a stock. Anybody who “invested” in Bitcoin thinking it would go up in value for eternity clearly doesn’t understand “investing” or currency.

            Anybody who was serious about Bitcoin certainly wasn’t holding them all at Mt. Gox, or any other exchange, because people who understand Bitcoin understood the risk of this type of thing happening.

          • Again, the whole point of a currency is to provide a stable medium of exchange. Bitcoin has signally failed to do that. Businesses accepting Bitcoin tend to immediately convert to a fiat currency, implying that they don’t actually have any faith in Bitcoin. As I said, you can accomplish the same thing with just about anything from a venture stock to fresh tomatoes if you like – it’s just not that far removed from haggling in a market square.

          • Don’t compare Bitcoin to a stock! Also, it’s done way better this year than Apple!

          • It’s also done better this year than any other currency on the planet. I’m not sure if you’ve looked at the charts since this morning, but Bitcoin has already recovered significantly. I hope you’re not up at 6am making investment decisions based on a couple hours of negative trading too often.

            Did you buy into Bitcoin at it’s recent highs? Is that you use the word “anger” in the title of this article? I certainly hope you didn’t divest based on fear and loathing after a few hours of negative trades.

          • I thought it wasn’t an investment?

          • Did I say I thought it was an investment? I’m simply referring to the fact that YOU have been calling it an investment.

            I frankly don’t care what you put your money in, you can invest wildly in Justin Trudeau rolling papers for all I care. I just think that doling out financial analysis after trolling crypto-anarchists all night on Twitter might not be the best idea for anybody, much less an otherwise respectable writer. I’d wager that in 6 months you’ll be looking back at this post with some regret.

          • Bitcoin’s got a lot of hype in the media lately. I’m sure a lot of people bought in at the top of the bubble, lost money, are feeling stupid and now need to blame the system for their own stupidity. Happens all the time. I’ll be keeping my Bitcoins.

          • Um, I guess you don’t actually pay attention to the CAD then, do you? Over the last year it’s fallen 10% to the USD. Meanwhile in the same timeframe Bitcoin is up 1000%.

          • “Cut in half”? It was a 15% drop, not 50%. And that’s after being up over 1000% over the last year.

          • Same here. It was the speculators that left all their BTC on Mt. Gox. I don’t think they even knew how to move them from that exchange. I believe that we will recover from all of this bad news before the end of 2014.

          • I store my “currency” in a totally non-liquid, non-divisible form, which just goes to show how excellent a currency it is! And, by the way, what year did libertarians start making bogus distinctions between “speculation” and investment? So that other guy who handled the snakes must have gotten bit and died because his faith wasn’t quite right?

          • Colby, do you actually think that Bitcoin is non-divisible? Do you actually think it’s non-liquid? Did you do more than 5 minutes of research for this article?

          • It’ll “recover” by the end of March. This isn’t the first time BTC has seen a huge drop based on “news” just to recover shortly after. It won’t be the last either, I’m sure.

          • It’s not even multiple exchanges that are a problem, it’s one single exchange. It’s like the world declaring the banking industry had gone tits-up just because Lehman Bros. went under. All of this speculation about the end of Bitcoin is absolutely absurd. Luckily I (and I suspect you) have seen this before.

        • If you had bought Bitcoin a year or two ago, you’d be up over 1000% today.

          • You’d be up 1000% only if you sold it. You currently hold a “paper gain.” It could disappear. Or triple.

            Aside: Can bitcoin be used for collateral anywhere?

          • Can bitcoin be used for collateral anywhere?

            Are you asking theoretically, or practically? I know there are currency exchanges that will allow you to lend currencies based on BTC for leveraged trading.

      • Bitcoin frees us all of our real money. Hey-oh. Bitcoin’s a joke. It’s over. Move on with your life. Insulting people on the internet isn’t going to bring back the fiat currency you lost.

        • This comment was deleted.

          • Yes, those who cashed out a few weeks ago are flourishing.

            It’s over. You’re ridiculous and the more you try to promote your failing joke of a ‘currency’ the dumber you seem.

          • You’re ignorance is showing. Claiming Bitcoin is “over” when it’s still trading well north of $500 just goes to show how clueless you are.

          • Give it a month. Then we can talk again. Also when was the last time a Canadian bank went bankrupt? Almost a century ago.

            Because, hey look, that’s part of the value of government-backed currency and real banks. It’s regulated and insured. You don’t have to guess whether your bank is solvent or run by criminals (in bitcoins case I’m going to guess no to the former and yes to the later in the majority of cases) in a zero information market. Hey look – that’s another real investments have that bitcoin doesn’t – investors can actually do due diligence on where they’re putting their money.

            Love that you’re going around insulting everyone (how many accounts do you have on here? Or is that just what all the bitcoin fanboys do?) when you’re the one who is unwilling to look at the actual facts. Remember when Bitcoins were worth $2,000 and people like you were saying it can only go up? And then it dropped and the fans said it will come back and now it’s down again and that’s fine – even though it’s worth a quarter of what it was in the fall.

          • Currency is based on trust, mass trust. Most people were already skeptical of Bitcoin, those who weren’t are now. Without that the “money” is worthless.

          • I wasn’t skeptical of Bitcoin, and I’m not anymore so now. This is like claiming that because one Canadian bank goes bankrupt the entire Canadian dollar suddenly becomes worthless. It’s an idiotic way to think.

      • So tell, how does it “free” us, beyond the bonds of common courtesy, loser?

    • How about the ability to near-instantly transfer any sum of money anywhere in the world with zero transaction fees? Or do you enjoy giving banks 3% of every dime you spend?

  2. Cyber thieves use a virus to pull off a digital currency heist

    Using a malicious botnet called Pony, cyber criminals have stolen an
    estimated $330,000 worth of BitCoins, LiteCoins, FeatherCoins, and other
    digital currencies. It’s considered the most ambitious cyber attack on
    virtual money so far.

    • Jesus Christ! Imagine if someone were to do that type of thing with fiat currency!

      Oh, wait…. it’s happened a million times.

      • It IS fiat currency

        • I don’t know why I bother. So botnets hack people’s bank accounts all the time. They’ve done it with Bitcoin before. What’s your point? Or are you just posting random links for fun because you like to spam these boards with meaningless gibberish?

          • You bother because you’re paid to. There was in fact no reason for you to post at all.

          • Pot, meet kettle.

    • I start to giggle at cyber attack and virtual money….really, and ya didn’t think that could be hacked. lmao
      I’ll keep my money off the virtual world and away from the cyber attack. Call me old fashioned, but I like to see an attack coming! :)

      • Well, your bank account, your credit card, your credit history, an ATM….can all be hacked. It doesn’t depend on ‘virtual currency’.

        • No credit card or credit history… I go gansta and pay everything with cash. If I can’t pay cash, I can’t afford it. Bottom line for me. Mortgage insured for fraud, through my real name, no ATM for me, no loans.
          Paranoid perhaps, but I live very well and more than within my means via cash.

          • That’s nice. When you’re through patting yourself on the back for remaining in the 50s, maybe you could address the topic.

          • I don’t bother patting myself on the back… waste of precious reach around time. I did address the topic, as posted by your comment. You addressed the risk via virus attack, I addressed how not to be at risk by personal experience. Both are valid.

          • Most people don’t live that way anymore….it’s not productive or good for a family or the economy. So it’s not valid.

            And why you’d discuss something you’re not interested in or knowledgeble about is another mystery.

          • Not so much… not knowing how it can work to someone’s disadvantage is different than not being interested.
            While I may protect myself in various ways and not have knowledge in being defrauded is different than understanding the ways that others can be, or learning how it could be done should it ever come up.
            For example, I’m very interested in why you think the way I live is bad for the economy. Is that because I don’t carry high interest loans? How does that help the economy? Besides the actual banks that is… I already know how it helps them.

          • If we had to wait for everyone to save up enough cash to buy a car…..or worse, to buy a house we’d never get anywhere as a country or an economy. This isn’t a village on the Volga in old Russia…..or a village anywhere for that matter. We are a $2T economy and up against stiff global competition.

            Most people are on salary, others get paid in lump sums for something specific like wheat…….they can well afford a car or a house but don’t have the cash all at once. So they borrow on future earnings.

            Borrowing and debt are perfectly legitimate financial tools….and as long as you have income, quite safe.

            Some people seem to have a Depression mentality still….what if you lose your job and never ever ever get another one? Not very likely these days.

          • Ha! Well, I did not live in Volga and was born here in Canada…. but, the sentiment is correct for the most part.
            I still don’t get how having more debt is good for the economy. With everyone being able to make a consumer proposal or bankruptcy…seems like no one gets their money and that isn’t good for the economy as the insurance covering this is weakened by so many making claims.
            I guess what you call Depression thinking, I look at as safe… I owe nothing, therefore if I can’t pay I lose nothing. I see this as a safety net for me and my family personally. How those that do not pay their bills are of benefit to me, I don’t see?

          • Because it allows us to leapfrog ahead instead of slog. If a man has to wait until he saves enough to buy a house and marry….well how old would he be at the wedding? Then there are kids and cars and so on. Over his lifetime he’ll earn enough to pay for it all….but it’s doled out in dribs and drabs.

            Imagine if you got a years wages all at once. Or 5 years wages. What could you do differently?

            So to counteract that….people borrow on future earnings. The slog then comes on paying things back….but at least you have a house to live in….or a car to drive. And your kids can go to school instead of having to drop out early in order to work and chip in.

            There will always be people who go bankrupt….but they are a small group, and shouldn’t hold others back.

  3. Dear MtGox Customers,

    In light of recent news reports and the potential repercussions on MtGox’s operations and the market, a decision was taken to close all transactions for the time being in order to protect the site and our users. We will be closely monitoring the situation and will react accordingly.

    Best regards,
    MtGox Team

  4. its alive

  5. Colby, I normally enjoy your writing, but this is woefully misinformed.

    1) Anybody who was “investing” in Bitcoin was an idiot to begin with. People trade currencies, they don’t “invest” in them for the long haul.

    2) The entire Bitcoin system remains entirely 100% secure. This is a case of one company that repeatedly refused to follow security best practices. Many in the community have been aware of this for a long time. Just because the ignorant weren’t aware of this fact, doesn’t taint the entire economy.

    3) Bitcoin has lost 15% of it’s value in 24 hours. Yet still over the last year it’s up over 1000%. I strongly suggest that you compare how this “failed currency” has done compared to the CAD over the last year and determine just which one is “dead”. Apple’s stock lost 20% in the last quarter of 2013, I don’t see many analysts calling the company “dead”.

    Really Colby, if you’re going to write about something, you should do your damn research first. You don’t “get” Bitcoin, that’s fine. But maybe you shouldn’t be pontificating about it’s future.

    • The words “failed currency” and “dead”, which you have put in quotes, appear nowhere in the piece you are commenting on. (The phrase “death zone” is used only to describe a particular Bitcoin exchange.) Bitcoin has been a fine store of value… for some. Anybody who signed a contract to pay for goods or services in Bitcoins, thinking they were money, won’t actually be too thrilled about that exciting 1,000% spike in value.
      The emerging defence seems to be “Bitcoin is 100% secure if you don’t use it as money; if you have to choose some digital implementation because you actually intend to use it as money, then it’s only as secure as the implementation.” But enjoy the buying opportunity.

      • I use Bitcoin to buy stuff all the time. I also use CAD, and sometimes USD. I don’t regret buying all that beer months ago just because the CAD has dropped since then.

        • Except, the beer didn’t change in price relative to your money – in fact since the beer was priced in CAD and your money was worth less (relative to USD) you actually saved money. Also, it was a drop of a couple cents.

  6. At the time of publishing (6:41am) the price of Bitcoin was $485. At the time of me writing this, the price of Bitcoin is $525.00, a SHOCKING INCREASE OF NEARLY 10%!!!!

    This is a clear sign that “this may not be the end of Bitcoin, but it is visible from here”.

    • There’s “dead” in quotes again. Next one makes me just start wildly deleting.

      • Edited… you still mad bro?

  7. remind me why we need another currency please.

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