Last week, we were amazed to hear that bitcoins had reached the astronomical price of $4,800.
Bitcoins are electronically created and stored information bits which are assigned an arbitrary value by the bitcoin creators, a private business. Bitcoins can be "mined" by solving mathematical problems or purchased for real money. Those bitcoins are touted as a new electronic currency, free from government control.
Promoters liken bitcoins to flat paper currency of the U.S. and other countries. However, there is one major difference, which is that dollars are a legal medium of exchange which must be accepted, whereas bitcoins can only be used in transactions where both parties agree to use them. In practice this generally limits the utility of bitcoins and make it very difficult to convert them to dollars. A second major difference is that, while the dollar loses about half its value every 20 years to inflation, that is no government or backing which could prevent bitcoins from becoming worthless overnight.
Bitcoin enthusiasts brush off these obvious risks by pointing to the great increase in value of bitcoins up to now. They expect the past history of bitcoins to predict their future, while it would be better to look at some other past histories to gauge the future. There was, for example, the great tulip bubble in Holland which saw tulip bulb prices soar into the stratosphere, only to crash back down when reality set in. At least they got a tulip bulb instead of an electronic blip. Think of the enthusiasm before the 1929 stock market crash, the 1999 internet bubble or the 2008 housing bust, and the bitter disappointment which followed as investors relearned the lesson that no tree grows to the sky.
Often the people hurt worst in these bubbles are the ones who can least afford it. They fantasize that the potential wealth will solve their financial problems while failing to take the concrete steps which could solve their problems over time. Listen to the wisdom of the Bible:
"He who tills his land will have plenty of bread, but he who follows after vain things will have poverty enough" (Prov. 28:19).
So don't get caught up in the bitcoin bubble. Virtual money is like a virtual kiss. It's no substitute for the real thing.
Ron Allen is a Christian businessman, CPA and author who serves in local, national and international ministries, spreading a message of reconciliation to God, to men and between believers. He is founder of the International Star Bible Society, telling how the heavens declare the glory of God; the Emancipation Network, which helps people escape from financial bondage; and co-founder with his wife, Pat, of Corporate Prayer Resources, dedicated to helping intercessors.
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