by Doug Henwood
Bitcoin, once a fairly arcane topic, is now everywhere.
The market pundit Robert Prechter, who is a great psychologist of financial markets despite being a devoted follower of Ayn Rand and believing in a piece of superstition called Elliott Wave theory, once argued that in the course of a major bull market there’s something called a “point of recognition,” when the general public gets on board. That means it’s getting late in the run and it’s time for pros to think about getting out (though a serious mania can go on well after John and Jane Q get involved).
It sure seems like we’re at that point with Bitcoin, whose price trajectory over the last few years resembles some of history’s great manias, like the Dutch tulip bulb frenzy of the 1630s, the South Sea bubble of the 1710s, and the US stock market orgies of the 1920s and 1990s.
What is going on? Before getting into the details, I should say that money in general is not a simple topic. Most people have a good understanding of how gold, which is something of a primal money, is mined, refined, and shaped into ingots or coins. Slightly less obvious is why it has a monetary status unlike, say, platinum. But it is rare, pure, easily divisible, and has been highly cherished throughout the ages.