Bitcoin, the digital money created as an alternative to currencies controlled by nations and banks, is finding that its wider adoption depends on both as governments in China and the U.S. demand enthusiasts play by existing rules.
Based on the monthly figures to Oct. 1 recently released by the St Louis Fed, FMQ jumped $227bn in September to $12,176bn. This puts it $4,819bn and 65% over the long-term exponential trend established between 1960 and July 2008, the month before the Lehman crisis.
Bitcoins have been in the news a good deal lately, and they get there in ways that suggest they are poised to impact the world of alpha and its pursuers. So it’s good to have a primer: A brief accessible essay that answers the simplest questions, like “what’s a bitcoin?”
Bitcoin, the virtual money that exists only in digital form, is spawning a real-world hardware boom. The currency, used to buy and sell everything from electronics to illegal drugs on the Web, has surged to about $135, more than 10 times its value a year ago.
A direct comparison between gold and currencies has two important functions: It allows economists to compare sound money with fiat currency for the purpose of monetary analysis, and it allows us to adjust the price of gold in dollars.
Almost no one accounts for monetary inflation when evaluating the gold/dollar price. This is a mistake that offers a tremendous opportunity for those who understand the true relationship between gold and fiat currencies.
Western economic commentary on China and Russia is usually colored by monetarist assumptions not necessarily shared in Moscow and Beijing. For this reason, the reasons their governments buy gold is not understood.