So I spent a good chunk of yesterday afternoon refreshing a browser tab instead of doing actual work, and I don't feel that bad about it because apparently half of tech Twitter was doing the same thing. Bitcoin hit $266 on Mt. Gox on Wednesday and then, within a few hours, fell to somewhere around $105 before clawing back up a bit. That is not a typo. That's a currency losing more than half its value between lunch and dinner.
I don't own any bitcoin. I want to say that up front because I think it colors how funny I find all this. A guy I used to work with, Dev, bought some back in late 2011 when it was trading for something like $3 or $4, mostly as a joke, mostly because he liked the idea of it more than he expected it to actually go anywhere. He's been insufferable about it since March, dropping vague hints in Gchat about "not selling yet." Yesterday he went quiet. I texted him around 3pm asking if he was okay and got a single thumbs up emoji back, which I choose to interpret as him white-knuckling through it at his actual job.
The mechanics of what happened are almost more interesting than the price swing itself. Mt. Gox, which is basically THE exchange right now if you want to trade bitcoin for real currency, got so slammed with volume that the site started choking. They put out a statement blaming something like a DDoS, though it's hard to tell how much of that was actual malicious traffic versus just way more people trying to buy and sell at once than the infrastructure was built for. Either way, trading got suspended for a chunk of time, which in a market that's already this jumpy is basically pouring gasoline on a fire that was already going. People couldn't get in to sell when they wanted to, which of course made everyone want to sell even more the second it came back.
I keep seeing this framed in the mainstream press as some kind of referendum on whether Bitcoin is "real," and I think that's the wrong question entirely. Currencies crash. Stocks crash. Tulips, famously, crashed. The interesting thing here isn't whether an asset went up 20x in a few months and then gave a chunk of it back in an afternoon, that's just what speculative bubbles do, that part is almost boring in how predictable it is. What's actually interesting to me is that there's no central bank, no circuit breaker, nobody who can call a timeout except the exchange itself deciding to just turn the lights off for a while. Whether you think that's a feature or a design flaw kind of depends on your priors going in, and I don't think Wednesday settled that argument for anyone who didn't already have an opinion.
The thing that gets me, and this is a small complaint but it's mine, is how much of the reporting treats "bitcoin" like it's one unified thing with one price, when really what you're looking at is the output of a single exchange (Gox) that happens to be the loudest and most liquid one. There are other markets, prices differ slightly between them, and none of this is nearly as centralized or as neat as a headline number makes it sound. I don't think that's dishonest reporting exactly, it's just easier to write "bitcoin crashed" than to explain order books to a general audience on deadline.
Anyway. I'm not buying in, not because I think the whole thing is a scam (I genuinely don't), but because I already missed the boat by a factor of about eighty and chasing a price after the fact is how you end up as the guy holding the bag when the next one of these happens. And there will be a next one. This isn't the first time bitcoin has done this dance either, if you go back to 2011 there was a crash from something like $32 down to pennies on one exchange after a security breach. People forget that because it was small enough at the time that almost nobody outside a few forums noticed.
If you were up late last night watching a chart move, you're not alone, and I hope you didn't have anything important to do this morning.