Currency and company's shares are two very different things. Currency is meant to be a shared dream, since it is no more than means of exchange and means of bringing values of many things to one common measure. However, when you start treating currency as investment, the picture becomes much more complicated. Especially with bitcoin, because the value right now has long detached from any supply or demand considerations and is driven by pure speculation. As such, it is heaven for speculators, but entirely unsuitable for use as a means of exchange, since it is unpredictable and impossible to use in business which values predictability. Let's say you want to build a business that accepts bitcoins. Unless your whole supply chain is also paid in bitcoins, how can you price your products if one day bitcoin costs 45 USD, next day it's 250 USD and next day it's 80 USD? How can you predict your profits, give forecasts to investors, make long-term plans, basing your business on such huge volatility?
Of course, there are ways to deal with it, and there are even ways to profit from it. But for average users of currency - used as currency, not as means of gambling - bitcoin right now is absolutely wrong. I would go even further and say any business that accepts it and doesn't do it for the tax/law enforcement evasion reasons is doing it for PR reasons only.
>>>> As a currency, the fundamentals are there
I don't understand what you mean by this. Currency as such needs no fundamentals as long as there are people willing to accept it. But currency as money is different from currency treated as an investment commodity. Confusing the two is a dangerous mistake IMO. And I see no fundamental reasons driving recent rally in bitcoins - could you name one? Please don't talk about weakening USD - if that would be the reason we'd see rallies in all traditional physical commodities used as hedge against fiat currency - such as noble metals, and we'd see other commodities raise at least in similar manner, and we'd see it in relation to other currencies too. While modest raise in bitcoin could be explained by weakening dollar, it's no way even near what we see here. So any other ideas?
I think our posts are talking past eachother as I did note the weakening currency in Cyprus and the increased acceptance of bitcoins for exchange in my response. Both of which will drive up demand for bitcoins and thus legitimately move the price, due to supply being fairly constant and predictable.
When I say "fundamentals" I am using the financial form of the word, as in the method of valuation that contrasts to "technical" analysis by trying to examine what actually comprises the price of something rather than just looking for patterns in how it behaves. A good discussion of the "fundamentals" of a normal currency can be found here (most of which don't pertain to bitcoin, but just try to think analagously): http://www.investopedia.com/articles/trading/04/031704.asp
I think you may also want to look into the "functions of money". As I was describing in my post, money doesn't serve just one purpose and while bitcoin is terrible at some of these, such as "unit of account", which all of: "predict your profits, give forecasts to investors, make long-term plans" fall under. On the other hand it actually functions fairly well as a means of exchange due to the fact that as prices fluctuate so can the value of the currency, something that physical currencies have a harder time doing. It isn't perfect and long term deals may require hedging, but as you allude to, there are ways to deal with this.
When you introduce a new commodity, like Bitcoin, there will be a speculative period like this.
Nobody knows how useful it is, how much people will like it. However, they are guessing that in the future, as more people hear about it, more people than now will use and like it.
At some point this growth curve of speculative investment will peak. The utility-for-transactions curve will "catch up with" it.
Of course, that stability will in and of itself make it more viable and hence more valuable, so it is all told quite a complex dynamic, as that affect will need to be factored in by investors ahead of time.
Of course, there are ways to deal with it, and there are even ways to profit from it. But for average users of currency - used as currency, not as means of gambling - bitcoin right now is absolutely wrong. I would go even further and say any business that accepts it and doesn't do it for the tax/law enforcement evasion reasons is doing it for PR reasons only.
>>>> As a currency, the fundamentals are there
I don't understand what you mean by this. Currency as such needs no fundamentals as long as there are people willing to accept it. But currency as money is different from currency treated as an investment commodity. Confusing the two is a dangerous mistake IMO. And I see no fundamental reasons driving recent rally in bitcoins - could you name one? Please don't talk about weakening USD - if that would be the reason we'd see rallies in all traditional physical commodities used as hedge against fiat currency - such as noble metals, and we'd see other commodities raise at least in similar manner, and we'd see it in relation to other currencies too. While modest raise in bitcoin could be explained by weakening dollar, it's no way even near what we see here. So any other ideas?