A Bit of a Problem

You've got to laugh. Only a few days ago and Bitcoin was being launched on the Chicago Futures market with a rocketing price. All the people making money from dealing in it predicted that it could only go up and people should buy, buy,buy. This column, in the company of bankers and economists around the world, thought otherwise and warned of the perils.

Today, thanks to the BBC website, things don't look so rosy for the "investors" who may have been stupid enough to buy recently.

Predictably some are scoffing at the downturn on the grounds that the price is still way above what it was at the start of the year. True enough but not the point. Anyone who has bought recently is now nursing a whopping loss. If those people decide to cut their losses and sell, then to whom are they going to sell? Not to those waiting for the price to drop just a little more. Not to those who can no longer afford to buy any more. And not to those who like drawing graphs by extending trend lines as a means to make financial decisions. And if there are not enough optimists to outweigh all these non-buyers then the price will plunge on downward until sentiment changes.

There is no science in any of this, other than the social psychology of mob behaviour. Humans hate to stand out from crowds and are always worried that they are missing out on something that everyone else knows about. Buying Bitcoin seemed a one-way bet for so long because everyone else was doing it. Now it looks just another oversold speculation in which the ordinary bloke, who always comes in late to such things, has got his fingers burned once again.