123RF
An illustration in which Bitcoins are re-imagined as less-volatile poker chips - 123RF
Graphic from ICE3X
Graphic from ICE3X

Ah, the soothing sight of red numbers (see price chart from ice3x). "Soothing? Red numbers?" I hear you cry out in confusion.

Because you bet the farm, or at least the mortgage on the farm, or your daughter's university studies, on Bitcoin and now you only want to see green, green, green!

Bitcoin, like some latter-day digital saviour, must rise up and bring you wealth and power, bushels of money pouring out of the ether into your coin holdings. You are not an investor, you are a believer! Bitcoin is your mammon and you are on your knees worshipping, right?

Let me explain why red numbers are good. Bitcoin needs to transition from being a phenomenon to becoming a properly tradeable commodity if it is to avoid the fate of the Dutch tulips, doomed to be mocked forever as the flower of greed.

The fact that the market rose above R178,000 per coin and then paused to hover around R155,000 is a sign that it is behaving rationally, exploring ceilings, asking what its price should be.

We may have reached the ceiling and begun the long road down to a true level or this may be a pause before the rise continues. Fascinating.

The mania over Bitcoin is well captured by this Wall Street Journal article which reports that "even grandma wants in on the action".

From the article (It's paywalled, but you can read it here with a BusinessLIVE subscription):

Rita Scott’s grandson convinced her in mid-November to get in on the latest investing sensation and buy bitcoin. “I thought it was a big coin,” the 70-year-old said. “I didn’t even know what it was, a piece of coin? Why would I invest in a piece of coin?”

With a few hundred dollars of her money invested in it, Ms. Scott quickly caught on and started checking the price several times a day, even while playing poker at a casino in her hometown of Las Vegas.

Late Monday, as the price approached $10,000 for the first time, her grandson, Anthony Santa, sold the bitcoin that he and his grandmother held, netting what he said was a gain of around 45% over just a few weeks.

To get an idea of the escalation of the Bitcoin price compared with other assets, take a look at this Reuters graph:

As boom markets go, Bitcoin is probably the biggest in living memory. Way, way, bigger than the dotcom bubble or the gold price rally of recent times.

There is now no shortage of establishment advice to get into Bitcoin in some way. Writing on Bloomberg, Leonid Bershidsky goes so far as to recommend 'Invest in Bitcoin, even if it's a bubble'. His argument?

Even if that money goes up in smoke, the investment will have helped make the world a better place. And the advice: There's a way to profit from that too, by making side bets on other applications of the technology that powers bitcoin.

That's also the case with other unprofitable projects that are losing the investors a lot of money and may lose more in the future: Tesla, Snap, Uber. Investments in them may never pay off -- or may only pay off for those who cash out at the right moment, like lucky investors in a Ponzi scheme. But they pay for humanity's important advances, and for progress in entire markets.

Humanity's important advances! Now you have a rationale for your greed. You're in it for humanity. To heal the world, make it a better place ... 

Here's evidence that Bitcoin has already made the world a better place:

Anything that turns young minds away from the Kardashians has to be a good thing, right?

But before you get too warm and fuzzy about how you are on a humanitarian quest to get rich in the interests of technological advancement, consider this: Bitcoin mining uses more electricity than Ireland or many African nations:

The rush into Bitcoin is taking place on platforms outside of the traditional trading environment (for now, but the sharks are coming ...). 

Computerworld wrote about this phenomenon as the Coinbase app was swamped by new users wanting to cash in after Bitcoin breached US$10,000. From the article:

What seems to be the world’s most reputable cryptocurrency exchange, Coinbase, has doubled its user base in the last year, with trade volume up eight-fold. It now has over 10-million customers.

“At a high level, I think we’re seeing a massive increase in the number of people who are buying their first digital currency,” Dan Romero, vice president of operations at Coinbase said. “We’re finding a lot of new people coming into the ecosystem.”This rapid growth poses problems — November 29 saw major cryptocurrency systems fail, meaning many Bitcoin investors were unable to sell at the top of the trade.

Meanwhile, it's life in the fast lane for crypto's early adopters ...

live in New York, at Buffalo 1994

No, this column does not dispense investment advice.

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