

Facebook Stock Not So Different Than Bitcoin - 1337biz
http://dealbook.nytimes.com/2014/02/24/facebook-stock-not-so-different-than-bitcoin/

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bsbechtel
The author makes some good points, but if he wants to make this comparison, he
needs to do so when Facebook shares and Bitcoin are trading at volumes the US
Dollar trades at.

Most mainstream economists can't get past the idea of a currency or unit of
value that isn't backed by a central authority to guarantee it's value. I
would argue that a currency backed by a central authority may be more stable
in the short-term, but in the long-term it is much riskier.

This is because you are exposing yourself to the risk of the backing authority
(e.g., the government) being incompetent or mismanaging the currency. Take the
Euro for example. This is why countries experience things such as hyper-
inflation and default on their debt. The issue is when a government is
managing (read: controlling) the value of the currency, the market cannot
correct itself when things go bad.

If I had money to put into Bitcoin today, I would do so based on the news of
Mt. Gox yesterday. Bitcoin will recover because there are more actors than
just a central government putting their faith and support behind this
currency. Facebook, on the other hand, is a stock which one day needs to
justify its value based on how much money it earns. At it's P/E ratio today, I
am not so sure it can do that.

