Bitcoin Through $20 First Time Since July 2011

Bitcoin has a handle on $20 for the first time since July 2011 on its way down from $33. This time around, however, it is on its way to who knows where after beginning to rally one year ago, consolidating from Spring through Fall, before picking up steam for a month in September, correcting from about $15 back down to below $10, and then continuing its rise to $21 as of this evening  on the sails of positive press for the digital currency. The digital currency has given central banks a cause for concern, causing government intelligence agencies, central banks and mainstream press outlets to write on the power of the payment processing solution. 

It is not merely the press parading Bitcoin around and the increased interest therefrom that has spurred the increase in demand and rise in price, for bitcoins are produced at a mathematical rate. The rate at which bitcoins are produced was recently halved. You see, the process is the inverse of what is going on with the US dollar and virtually all other fiat currencies.  As you see in the chart below, from January 1971 – as the US dollar was being de-pegged from gold – the amount of all sorts of fiat currencies skyrocketed from under trillions to trillions in debt. It is not only the US dollar, Euro, Japanese Yen and Chinese Renminbi that are experiencing this shock, but all currencies in all countries.

As you can see, the amount of bitcoins produced follows a much different trend than does the fiat currencies since the divorce from gold in the early seventies. If anything, the bitcoin production chart resembles the fiat currency value charts – or rather devalue charts.

While commonly empires are viewed as powerful entities that gain power and influence over time, this is really just an illusion, for the true benefactors of that power and influence are those who control the empire. The “empire”, which can be seen here in this chart of the US dollar since 1900, is really the one that loses out. The US has a long-winded history of wars, from its own backyard Latin America to the Middle East of today, the US dollar has along the way been gutted.

Bitcoin in terms of all fiat currencies has been an undeniable bull market in the mainstream economic definition even if bitcoin is a not so mainstream instrument. Early adopters of bitcoin have done well, but that is not to say that bitcoin is a runaway train bubble to oblivion, for the free market will temper its rise. For instance, while in recent months it has been difficult to mine Bitcoin, it has only now become easier with ASIC rigging operations.

No matter where one goes in the world, they are going to be somehow affected by currency devaluation. Granted, while presently it might manifest itself as appreciation thus dampening exports,  in the long run of things even developing countries will begin seeing the charts seen in the UK and US.

But, by living in the clouds, one can get out of this devaluation oblivion. One need to only suspend their disbelief. The economy in its present makeup is a wonderland of sweet nothings. It doesn’t make sense. It doesn’t need to, either. It is a mark-to-model universe of chaotic anarchy and criminality and corruption, etc.

But, with the Bitcoin Standard, you see that your holdings with automatically hold over time, and that holding the coins is similar to holding stake in the Internet itself. Once again Bitcoin has broken through $20, and it has done so with a graph that any economic analyst would say looks like is only building.

All else being equal, the more people who use Bitcoin , the greater the demand for it — and the higher its price, because the supply is fixed. This means that in the long run, Bitcoin’s price will be positively correlated with its adoption.