Precious Metals Supply and Demand Report That’s it. It’s the final straw. One of the alternative investing newsletters had a headline that screamed, ‘Bitcoin Is About to Soar, But You Must Act by August 1 to Get In’. It was missing only the call to action ‘call 1-800-BIT-COIN now! That number again is 800 B. I. T.. C. O. I. N.’
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Is it about to go up? Maybe. We don’t know. And everyone should by now be skeptical of all ‘rocket to take off on XYZ date’ claims. Between them, surely these newsletters have predicted thousands of the past zero blastoffs of gold and silver since 2011.
We have discussed bitcoin in the past, to argue that it is not money (a video here, and articles here and here). Bitcoin is not money because it is not a good. It’s just a number in a database. Money is a kind of good (genus). The most marketable kind (differentia).
Money must be a good because we are physical beings in a physical world and final payment – which is not demanded all the time, or even often – must be a physical thing that you can hold and touch in your physical hands. Bitcoin is not a physical good, so it represents, not final payment, but intermediate payment. It is not final until you trade the bitcoin for a real good. In the language of economics, a real good has utility apart from one’s hope to exchange it for something else. Bitcoin has no utility apart from this hope of its value in exchange, its price.
There is not one price but always two prices: bid and offer. When one has a thing and relies on someone else to buy it (or accept it in exchange), it is the bid price which is relevant. The offer price may be close above the bid, or it may be much higher. Typically sellers are reluctant to sell below their cost, but that has nothing to do with buyers. Buyers make a bid based on how they value it (or not).
This post was published at Acting-Man on July 31, 2017.
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