How Many Potatoes to the Bitcoin?

I was running an event last week where a chap turned up and instead of offering three pound coins or similar to pay the entrance fee, he instead produced a rucksack filled with potatoes, which he was fairly confident were King Edwards, and asked if he could pay with them. He was deadly serious. There are a number of problems here. Most importantly I don’t really know the exchange rate. I guess it would have been the same with Bitcoin, if someone had come in and asked to pay in Satoshis. To be fair it would also have been true for almost any currency in the world, too.

There are organisations run, as far as I can work out, by guilty ex-traders, proposing a commodity-based economy. Well, newsflash: we have a commodity based economy, and it’s for that reason we use a proxy for making transactions! In practise, foreign currencies are commodities too. I also wouldn’t have been keen on accepting gold, silver, diamonds, oil or Green Shield stamps (which I imagine are now collectors’ items – some things never change).

Knowing your prices – that’s the difficulty. It’s the reason that when you intend to buy something at auction you should do your research first and know what your max bid is, because it’s very easy to get swept up in the moment. Then you’re likely paying a premium for the excitement of the experience. Make sure this doesn’t happen when you’re trading. A golden rule for you: NEVER chase a price.

Bitcoin is a bit problematic because there isn’t really proper price discovery like there is on stock markets, or for that matter supermarkets, where they’ll often guarantee a best price against their competitors. John Lewis are ‘never knowingly undersold’. We know on the markets that spreads are very tight because of price discovery and also laws for market makers on the main markets. No such thing exists for Bitcoin. It’s more like a second hand car, or a stamp collection. Valuation is highly subjective.

And what of Bitcoin now? Well I’d say looking good for a break upwards. Great looking MACD. Just look at that higher low on the histogram, now a crossover. Great low hammer candlestick there a few weeks back. It’s rangebound which means it should move up to the £300 level whether it breaks out or not. This chart covers about 1 year – it’s quite hard to get Bitcoin data to manipulate but it is probably possible to find a longer price history than this one if you look around. For historical prices of potatoes check with your local supermarket.

That still doesn’t mean I’m going to enter into £3 transactions with it though! And going back to potatoes and such, I shall be looking into the ‘bad economics’ sites soon and reporting on what is seen by many as a solution to all the world’s problems in their commodity based society models. In reality the world’s problems can all be made at least a bit better by only one thing: less population, or at least a slower birth rate. But that, as they say, is another story.