I've been getting a fair number of comments on my Bitcoin post from a few days back, itself a response to Fred Wilson's Bitcoin post. Most think I'm completely wrong about Bitcoin and its future as a form of currency. Some commenters are particularly upset by my assertion that Bitcoin is illiquid — by which I mean its value isn't predictable enough for it to function as a ready medium of exchange (although it's not that simple because liquidity is a cryptic concept, used commonly in finance in a sort of metaphorical sense, but ill-defined and misunderstood, really reverse-engineered from its features, one of which is predictability of price).
Here's a sample, from MoonShadow:
The true irony of this article is that Bitcoin is nearly perfectly liquid, even though it's ultimately deflationary. I know what liquidity is, liquidity is the ability of economic actors to engage in exchange rapidly and with as few intervening steps as possible. This is why cash is very liquid and real estate is not. Bitcoin is very much like cash in this respect. Go try and tell Bitcoin users that Bitcoin is illiquid, and they will laugh at your ignorance. The only people for whom Bitcoin is not liquid are those who don't have any.
Thomas Niedermueller/Getty Images
STRASBOURG, FRANCE - NOVEMBER 24: French President Nicolas Sarkozy (C) shake hands with German Chancellor Angela Merkel (L) and Italian Prime Minister Mario Monti (R) on November 24, 2011 in Strasbourg, France. The three are meeting to seek agreement on how to resolve the Eurozone debt crisis as both Monti and Sarkozy are under pressure to reassure financial markets over the future of their respective countries' economies. (Photo by Thomas Niedermueller/Getty Images)
The markets are rallying big-time today, with the Dow alone up more than 400 points. So what's going on? Elizabeth Harrow at Shaeffer's Research sums it all up rather neatly:
[T]he good news seems to be pouring in from all corners of the globe: Euro-zone leaders finally agreed on ground rules regarding the expansion of the European Financial Stability Facility (EFSF); policymakers in Beijing lowered their reserve requirement ratio for banks; and the Federal Reserve coordinated with the European Central Bank (ECB), Bank of England, Bank of Japan, and other major central banks to lower the cost of emergency dollar loans. And, as if the bulls needed another catalyst, the day's slate of domestic data was surprisingly robust. Payroll giant ADP announced that the private sector added a stronger-than-forecast 206,000 jobs last month, while pending home sales and the Chicago PMI also improved beyond economists' expectations.