A Flash Crash In The Bitcoin Market Revealed The Currency's Biggest Problem
ConvergEx Group strategist Nick Colas wrote in a recent note that what is happening in the Bitcoin market is actually an instructive lesson on global economics.
“What’s interesting to note is why BTC prices plummet, which they did in the back half of 2011,” says Colas. “The cause was a very short-lived hack attack on one Bitcoin ‘Wallet’ company out of Japan, which caused the price to drop from $27 down to $2 in a few months.”
The cause of this week’s crash was different, but the key takeaway is the same: “Confidence in money as a store of value is the ultimate driver of its value, both in the cyber and real worlds.”
How much confidence do we have in State sponsored fiat currency, after all.