Why Worry About Bitcoin? Why Not Just Start Your Own Currency?
I ALWAYS feel remarkable clever when I find the Financial Times agrees with one of my ideas. It seems like confirmation that I’ve had a good idea sorta thing. And here they’re saying that investing in Bitcoin doesn’t look all that good an idea. For you can start up your own digital currency instead.
Buying Bitcoins while their price is so bubbly is nothing more than a gamble. Investing in other online currencies, or in companies that can help the Bitcoin economy develop, looks like a sensible use of a venture capitalist’s money.
OK, they don’t quite say invent your own currency but this is something that has been looked at. If you went out and hired the top quality talent to do the job right you might end up spending about £50,000 to create an entirely new and different digital currency. And that is, in the context of these things, peanuts. Or about 70 Bitcoins actually.
Quite what would then be done with this new and wondrous currency is of course not really known. But that’s not the point. For there’s an investment fever going on here. Something rather like the tulip mania or the dotcom bubble. It doesn’t particularly matter about the long term future of these things: the presumption is that you’ll have some, the price will rise and you can sell them again.
Of course, that’s also the classic description of a bubble. But people do make money in bubbles: you’ve just got to be very sharp indeed about when you get in and when you get out.
It’s also worth remembering another story about a bubble, the Great Gold Rush in the American west. It wasn’t the gold miners who made all the moolah at all: it was the people selling them the spades and the food to eat while they were mining that did. Inventing a currency to sell to other people might make more than playing around with one already made.
Photo: General view of the ” Pembury Tavern” in Hackney, London. The first pub in the UK to accept virtual currency.