Bitcoin Just Crossed a Billion Dollars and Now Everyone's an Expert

So this happened sometime in the last few days: the total value of all bitcoins in existence crossed a billion dollars. Not the price of one coin, the whole market, all the coins out there, added up. Price is sitting somewhere around $92 a coin as I type this, which is completely bananas if you remember, like I do, when it was trading for something like $13 back in January.

I have a weird relationship with this whole thing. Back in late 2011, when this blog was maybe a month old, I ran a miner on an old Radeon 5850 I had lying around, mostly out of curiosity, mostly because a guy on a forum wouldnt shut up about it. I got something like 40-odd coins for my trouble and my electric bill, forgot about the wallet file for over a year, and only remembered it existed a few weeks ago when a friend asked if I'd "heard about bitcoin." At the time those coins were worth less than a decent lunch. Now theyre worth a car payment. I havent sold them. I'm not entirely sure why not, probably some mix of laziness and not wanting to deal with Mt. Gox's verification queue, which from what I hear is still a mess.

Cyprus is doing a lot of the heavy lifting here

The timing isnt a coincidence. Cyprus has been a genuine disaster this month — banks closed for almost two weeks, capital controls now in place (something like a 300 euro daily withdrawal cap once they reopened this week), and depositors with more than 100,000 euros in their accounts getting a haircut as part of the bailout terms. When a government can reach into your bank account and take a cut because the banking system is insolvent, a lot of people start looking around for somewhere else to put their money that a finance minister cant touch. Bitcoin fits that description pretty well, and apparently enough Cypriots (and Spaniards and Greeks watching nervously) agree that its showing up in the price.

I get the appeal, I really do. But I'm skeptical of the framing that's suddenly everywhere, this idea that bitcoin is "digital gold" and a hedge against government incompetence. Gold doesnt lose 40% of its value in an afternoon because some Slovenian exchange got DDoS'd, which is a thing that has actually happened to Mt. Gox before. A currency that can swing that hard in a day isnt a safe haven, its a speculative bet that happens to be correlated with people panicking about safe havens. Those are different things even if they look similar from a distance.

What actually bugs me more, honestly, is the sudden crowd of people at parties who want to explain blockchains to me now, having never mentioned the word "bitcoin" in their life before last week. I dont say this to be smug about having mined some on a whim two years ago — plenty of people got in earlier and more seriously than I did. It's more that the conversation always goes the same way: five minutes of "so its like fake money" followed by ten minutes of them explaining mining to me like I havent already sat next to a space heater of a GPU for three months straight.

Practically, if you're curious and want to actually buy some rather than mine it (mining on a normal computer at this point is basically pointless, the difficulty has scaled way past anything a home GPU can compete with), the process still isnt great. You wire money to Mt. Gox, wait for it to clear, wait more for account verification, and hope the price hasnt moved 15% while you were waiting. There are other exchanges now but Gox still handles most of the volume, which is its own risk given their history of outages at exactly the moments when everyone's trying to buy or sell at once.

Anyway. My old wallet file is sitting on an external drive in a drawer, and for the first time in about a year I actually know exactly what's in it. Not selling yet. Ask me again if it hits $150.

Sources: personal price observation and general market/news awareness from this week, no single article cited.