Another (Weird) Week in the Bitcoin Craze

It's been a particularly interesting week for Bitcoin, the popular virtual currency that is stateless and anonymous, and thus nearly perfect for all sorts of "commerce" on the Internet that people don't want to run through a PayPal account.

First, even by the standards in Bitcoin trading it was a wild ride this past week, with one Bitcoin trading in a range of $340 to $1,240 just this last week. Those prone to airsickness probably shouldn't hold any Bitcoin.

Then, the Norwegian government became just the latest to declare that a Bitcoin isn't money.

The European Banking Authority ended the week by issuing what was effectively a blanket warning, citing the wild fluctuations in price, the danger that the so-called digital wallet could get hacked and the complete absence of legal protections for users.

It's not even clear that if an owner gets all of his Bitcoins stolen that there would be any way to show that a crime had been committed.

Fidelity Investments, the big mutual fund company, also took steps this week to block investments out of clients' IRAs into a Bitcoin investment trust.

For Bitcoin enthusiasts, these are the pronouncements of people who just don't understand. The appeal of Bitcoin is that it's stateless, anonymous, and beyond the reach of mutual fund managers, regulators and central bankers, who back in 2008 didn't impress anyone with their competence, anyway.

Many enthusiasts gathered earlier in the week in Las Vegas for a conference called "Inside Bitcoins: The Future of Virtual Currency." One reporter who attended said it had to feel of an old-time religion revival meeting.

There were whoops and shout-outs when one of the speakers said that Bitcoin was going to be the single biggest category for 2014 venture capital investment.

The venture firm Andreessen Horowitz punctuated that point this past week with news that it had led a $25 million Series B investment in San Francisco-based Coinbase, which is thought to be the largest-ever venture investment in a Bitcoin-related company.

My view continues to be that new forms of payment systems will evolve and become broadly accepted, but that Bitcoin is today mostly a pseudo-asset that has somehow captured the fancy of speculators. And like most speculative fads, this speculation will abruptly end one day with plenty of speculators painfully impaled on their Bitcoin wallets.

Perhaps what was most striking about coverage of the conference in Vegas was the simple observation of a USA Today reporter that the audience consisted almost exclusively of men.