More on Bitcoin, following my recent Newley’s Notes devoted to the digital currency:
Financial advisor and author Ben Carlson has a post at his (quite enjoyable) blog, A Wealth of Common Sense, on how to explain the rise of Bitcoin. He puts it down to the following factors:
- Storytelling — the narrative — which may be true — is that Bitcoin represents a new kind of paradigm and none of the old rules about other asset classes apply.
- Technology — the block chain represents a legitimate technological leap, hence there is legitimate excitement.
- Decentralization — the global financial crisis has weakened our faith in institutions like big banks, and Bitcoin is basically institution-free.
- Resilience — Bitcoin has crashed before, but continues to rise, he says.
He concludes:
Anyone who tells you they know where this thing is heading, how to value it, where it ends, etc. is nuts. No one has a clue. This is everything you’ve ever read about the markets all wrapped into one — FOMO, supply & demand, human nature, behavioral biases, volatility, booms, busts, uncertainty about the future, etc.
Seems about right to me.