Just a few days ago I wrote about the Bitcom phenomenon in an article titled "Bitcoin: Buyer Beware, This Is A Classic Bubble And Possible Fraud." I did my best to warn readers about the likely pending doom of the Bitcoin. The article was written just 3 days ago, on April 7, 2013. Since that time period, in true bubble form, the Bitcoin went from trading about $150 to as high as $266. No that is not a typo. In true hyperbubble style the Bitcoin was up over 77% in less than 3 days. Two years ago it traded at $0.05.
When I wrote the article I expected to have to wait a few weeks, months or even years before the peak. but it looks like we may have already seen the peak in the Bitcoin market. Today the Bitcoin traded as high as $266, went as low at $126, and the headline reads "Bitcoin price fluctuates wildly after massive run-up, losing up to 50% of value." If people didn't understand the risks of the Bitcoin before, they are certain to now. I went to check the charts but was unable to getting nothing but "502 Bad Gateway" alerts. That may be a sign that panic is gripping the Bitcoin market. I was able to find a quote page, and the article linked above is already out of date. The current quote page is showing the Bitcoin trading at $131.00, and was as low at 101.50 today.
If the quote above is correct, and the Bitcoin did drop from $266 to $101.50, a drop of over 60% in a day, it proves my thesis written 3 days ago that:
1) The Bitcoin is a Bubble
3) Bitcom buyers need to be very cautious
In conclusion, three days ago I wrote an article trying to warn and educate readers of the dangers of and myths supporting the Bitcoin. My whole intention was to prevent people from experiencing what happened today. Today's Bitcoin action was simply inevitable, and it is very rare for bubbles, once they have popped, to regain their past glory. In my opinion people should stay clear of the Bitcoin. Many of the principles that supported the Bitcoin are also supporting gold, and I would imagine gold will eventually succumb to reality as well. Facts are, it is highly unlikely that the world monetary system is going to collapse, and it is even more unlikely that a new currency or monetary system will replace the US Dollar as the world's reserve currency. Bitcoin is likely to be a an undeniable case study as to the dangers of currency speculation, and the strength, stability and reliability of the US Dollar. The Bitcoin vindicates the US Dollar, and strengthens its appeal. Once the markets accept that, a main reason for holding gold disappears. Holders of gold and Gold SPDR Trust (NYSEARCA:GLD) should not ignore lessons to be learned from the Bitcoin.
Disclaimer: This article is not an investment recommendation. Any analysis presented in this article is illustrative in nature, is based on an incomplete set of information and has limitations to its accuracy, and is not meant to be relied upon for investment decisions. Please consult a qualified investment advisor. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author's best judgment as of the date of publication, and are subject to change without notice.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.