No, it is not surprising. If you look at the Bitcoin forums to understand the community, it is very clear that a large core of users are really here for the long term. They truly believe in the concept of a decentralized digital currency.
This core group of users (including me) were completely unswayed by the crash of 2011 H2. We all knew that it was nothing more than a correction of the insane valuation bubble of earlier that year.
This is not an asset, it is a currency. Asset values do well when investors buy-and-hold for the long-term. Currencies die that way - they increase in value when they are traded, i.e. transacted in. A high ratio of buy-and-hold investors to merchant activity in a currency is a sign of speculative build-up. Paradoxically, the attractiveness of a currency to trade in is partially a function of how well it holds value - price level volatility bodes badly for that cause.
As a financial market participant, yes, it is surprising that the Bitcoin market stabilised as quickly as it did since it suggests there was an influx of asset and currency owners willing to trade their value into Bitcoins despite the risk of rapidly losing that value in price level volatility. Having examined some AML flow of funds data I can say this resilience has nothing to do with the zeal of the Bitcoin community, which in terms of wealth is insignificantly tiny, and everything to do with its adoption in trades deemed, shall we say, unsavoury by the world's legal authorities. As a supporter of further sophistication in the Bitcoin markets myself, this sentiment of seeing nothing awry in the Bitcoin/USD volatility is worrying, though the faith expressed in the currency is reassuring (these are, after all, fiat currencies).
And I think this is the actual problem with Bitcoin, the community is small and few people are owners of Bitcoins.
How many people sold all their Bitcoins in the wake of that crash? It is indeed unsurprising to me too that Bitcoin recovered after a crash, because the owners of Bitcoin believe in it and so the market kept being rational post-crash.
The real test of Bitcoin has yet to happen, when Bitcoin will be popular enough that regular folks will put their life savings into it.
That test is unlikely to happen. regular folks do not put their life savings into currencies or commodities. They put their life savings into banks. A saving account in a bank does not contain a heap of cash or gold nuggets. Instead its an trust relationship between the bank and the bank customer, like a contract.
I would guess that in "the future", the name of currencies will become less likely to end up in the mindset of the general public. All they know is that a specific thing (a computer, a car, and so on) will cost X amount of what they have in the bank.
That test is unlikely to happen. regular folks do not put their life savings into currencies or commodities. They put their life savings into banks.
And your savings account is denominated in ...?
(hint1: USD EUR JPY CAD AUD)
(hint2: The 'stuff' people exchange for goods and services)
(hint3: Currencies!)
You're right about commodities, though. Unless you are deliberately taking positions in commodity ETFs or futures contracts (something that a person is unlikely to be doing without knowing it), you are probably not taking on commodity exposure.
Regular folks do not put their life savings into currencies or commodities. They put their life savings into banks.
What planet are you from? On my planet, regular folks put their savings into 401k accounts, which invest in stocks, bonds, and sometimes commodities. If you do choose to keep your savings in a bank, you're investing in a currency (probably the US dollar.)
Instead its an trust relationship between the bank and the bank customer, like a contract.
Nope. Actually it's a trust relationship between the federal government, which insures your account up to 250,000 through FDIC, and you. You also have to trust that the federal government isn't going to inflate away your savings (spoiler alert: they are going to.)
I guess it depend on where on the planet one is (or maybe its on the not-the-usa-planet). I am not sure banks where I live even have anything called 401k plans. They do have stocks and bonds, but its not something commonly talked about. pension savings are done mostly through tax but in rare occasions, addition money is added by the place you work from. In very extreme rare occasions, people sometimes add personal savings to it.
I've been trying to buy bitcoins for a month via dwolla and mtgox, still haven't been able to make the purchase. I don't know how "regular folks" are supposed to get in.
