Charting bitcoin, it looks good, if you are inclined to gamble on charts. The recent collapse from two hundred dollars tested support at the hundred dollar mark, found plenty of support around there. By and large, it is a good idea to buy at major support levels, since a speculative property is a lot more likely to go up than to break through the support level. If it did not penetrate the support level for very long during the panic, likely will not do so now.
But I am an intrinsic value investor. What is the intrinsic value of Bitcoin? In one sense, absolutely nothing.
But, in another sense, bitcoin is better than gold.
Moving physical gold from point A to point B in order to settle a transaction is obviously inconvenient and dangerous, so naturally one prefers to leave it locked in the vaults of some power that is famously reliable, trustworthy, and resistant to coercion, such as … The United States after World War I and II … and merely move ownership around. Banks and nations kept their gold with the United States Federal Reserve, which supposedly kept it in Fort Knox and similar places.
Now, people are increasingly realizing that there is no gold in Fort Knox, and the US Federal Reserve stonewalls increasingly insistent demands for withdrawal. It is the closing of the second gold window. Paper gold is in slow motion collapse.
This is a major and fundamental advantage of bitcoins – that bitcoins can be moved from being controlled by one secret, to being controlled by a different secret, hence can be moved at speeds that though much slower than light, are faster and more secure than any merely material thing can achieve.
Of course gold has the advantage of history. Gold really is money because it is money, and bitcoins really are not money because they are not, and for bitcoins to become money will take, not as much time and blood as gold took, but still quite a lot of time and blood.
Gold has an enormous advantage of being truly untraceable, in that one lump of gold is indistinguishable from another lump of gold. Bitcoins are, unfortunately, totally traceable, and, contrary to report, not very anonymous at all. Bitcoins, however, being totally unregulated, and even harder to regulate than gold, have wonderfully convenient money laundries. Some of these money laundries are probably NSA fronts (private citizens are not the only people who find untraceable money convenient), but the lack of busts would suggest that none of them are FBI fronts.
The potential value of bitcoin is entirely monetary. The instability of bitcoin undermines its monetary use, indicating an excess of speculators over people actually using bitcoin for monetary purposes. Supposing that the monetary use of bitcoin is growing, or likely to grow, this is a reasonable equilibrium.
It looks as if bitcoin has support levels at psychological round numbers. For a long time it was steady as a rock around fifty dollars, then it shot up to two hundred dollars, crashed down to one hundred dollars.
Supposing that the monetary use of bitcoin continues to increase, I expect it will sit at one hundred dollars for a while, then wander erratically between one hundred and two hundred dollars, then sit at two hundred dollars for a while. Next support level after that, five hundred dollars. The arbitrary and conventional values of these numbers reflects the fact that they are ratios between two currencies that have only arbitrary and conventional value.
Moldbug, on the other hand, argues that monetary use of bitcoins is vulnerable to state action, that a determined government effort to shut down the monetary use of bitcoins, for example by criminalizing MtGox, would kill it stone dead. And if the monetary use of bitcoins continues to grow, there certainly will be such a determined state action.
I think Moldbug has excessive belief in the power of the state. He thinks governments are always omnipotent, I think they are bluff and theater floating over a storm tossed sea of anarchy. A part of town where order comes from the police is an unsafe part of town. And if one is in that part of town, and feeling nervous, as one should, one ducks into a mall or a McDonalds for safety. That nervous people are inclined to head for the mall, not the police station, leads me to believe that attempts to demonetize bitcoins are likely to fail.