The pop media is now circling with '"b"itcoin is dead' commentary, prompting me to state yet again, that the value proposition that the "B"itcoin technology represents is grossly misunderstood, if it is even captured by the pop media at all. Remember, Bitcoin with an uppercase "B" is the blockchain, the transport mechanism, the scripting language and the decentralized, distributed trust consensus ecosystem upon which my startup is focused to build solutions upon. "b"itcoin with a lower case "b" is a digital currency and oft times digital payments app, simply early applications (and the most rudimentary ones) in the early portion of this paradigm shifting ecosystem.
As a matter of fact, the drastic drop in the price of bitcoin serves to highlight the true value of those utilizing the technology behind bitcoin - the blockchain. The drastic drop (or pop) in prices does nothing to alter the business models of these companies. The value proposition lies in the blockchain and programmability, not in the price of individual currencies within a digital currency app - yes, bitcoin as a payment system or speculative currency is an app within an ecosystem, not the ecosystem itself. Until one is able to grasp this concept one will simply be chasing the erratic prices swings of a single cog within a complicated machine up and down - all the while missing the opportunities within.
To proclaim the death of bitcoin due to a drop in the price of components of one of its apps is akin to proclaimng the death of the Internet due to the drop in the price of AOL stock. Yes, it does sound assinine, but that's what the media is proclaiming.
A tightly related, yet tangential story can be used to prove my point (for those that are not familiar with UltraCoin, it is a blockchain-powered Global Macro trading app that allows anybody, anywhere to trade almost anything with any amount of money on a counterparty/credit risk-free basis). WSJ reports: Macro Horizons: Shock Swiss Policy Turn Alters Equation for Other Central Banks [13]:
WRAP: The Swiss National Bank rocked European markets in early trade by abandoning its euro floor. Unable to resist the pressure of euro devaluation against the dollar, and with more likely to come as the European Central Bank prepares to launch quantitative easing, the SNB faced catastrophic losses on its mounting holdings of the eurozone currency if forced to abandon the one-sided peg sometime further down the line. The immediate significance is for people elsewhere in Europe who hold Swiss franc-denominated mortgages, to Swiss corporations which find themselves suddenly 20% or so less competitive against eurozone rivals and to leveraged investors betting that the SNB would hold fast forever. More generally, it reminds people that central banks aren’t invincible. Ultimately, their efforts and intent can be defeated by even stronger market forces and by having to weigh difficult political judgments. Ironically, one of the outside effects over which they have no control are the actions of their counterparts in other countries – which is what the SNB’s will do to others. Poland’s central bank now has a whole new game plan to think about in a meeting Thursday whose decision is due shortly. And a string of earlier central bank decisions in Asia, including a surprise rate cut by India, now have a different meaning for their currencies because the Swiss central bank has just put the franc back into the mix as one of the globe’s safe havens. (AM, MC)
SWITZERLAND: Switzerland’s central bank abruptly ended its policy [14] of maintaining a minimum exchange rate of 1.20 Swiss francs to the euro, while at the same time cutting its key interest rate to a negative 0.75% from 0.5%. The Swiss National Bank also said that it was moving the target range for three month Libor to between -1.25% and -0.25% from the current range of between -0.75% and 0.25%.
In what must be one of the most currency market-shattering announcements made by a central bank in recent memory, the SNB ripped the ground out from anyone with an interest in the Swiss franc-euro exchange rate. At one point the euro collapsed to 0.86 against the Swiss franc, from 1.20 immediately before the announcement – a 28% move. That must stand as one of the most dramatic developed market currency moves ever. The SNB justified the move by saying that the 1.20 ceiling had been put in place at a time of serious Swiss franc overvaluation and that while the franc continues to be expensive, it is no longer quite at such an extreme – in part thanks to the dollar’s recent surge. We await fallout among investors holding Swiss equities and macro hedge funds who had taken the 1.20 level to be sacrosanct. (AM)
On that note, notice the trade on this 100% bitocin blockchain powered application. We are going long the Swiss Franc (betting that its spike against the euro will continue past the news event this morning (NYC time) due to its floor decoupling/unpegging from the lagging euro and short the leverlaged oil ETF which had a deadcat bounce up over 7% for the night, where we're assuming it will continue its drop. This is all done in one trade, and this is the power of the bitcoin blockchain. Forget the price of the widgets of that one blockchain app and open your mind to the future of distributed decision making.
For the more adventurous, here's a long CHF short EUR and GBP trade.
