Was the Bitcoin Flock Just Sheared?
The virtual “currency” Bitcoin has been much in the news lately, due to its meteoric rise in price, and even more precipitous drop. The price rose from approximately $40 in early-March to $266, then plummeted to as low as $54 in the course of a couple of days. Most of the commentary has been a colloquy between true believers (including anarcho-capitalists, self-styled Austrians, etc.) and more mainstream skeptics. The true believers say things like “Bitcoin is the most important invention ever” and wax eloquent (and ecstatic) over its liberating potential. The skeptics point out the various practical limitations, which are quite acute. Count me as in the skeptic camp, but that’s not what I will address in that post. Instead, I will focus on the rise and fall in the price over the past month (which has been the second BitBubble-there was also a less severe one in 2011). Wha...