So this is the chart of Bitcoin’s price, and its trading volumes, going back to the point where it first became a thing:

This comes from
This comes from

Let me zoom into the last two days:

Screen Shot 2016-08-03 at 7.09.41 PM

So you see those rapid spikes in red volumes (the ‘red’ indicates that the trades were settling at lower prices than the trades that preceded them – green indicates the opposite), alongside the collapsing price? That’s the bitcoin market reacting to news that one of the Hong Kong based Bitcoin exchanges, Bitfinex, had been hacked – and that 119,756 bitcoins had been stolen. That’s a ±$65 million burglary (at mid-morning prices on 3 August).

Some statistics:

  1. There are about 15.2 million bitcoins in existence right now.
  2. So the theft involved 0.8% of the total bitcoins in existence.
  3. The initial drop in value wiped out $2.5 billion or so from the world of Bitcoin.

This – this is real volatility. Can you imagine a bank heist causing the US Dollar to plunge by almost a fifth before recovering a bit in the space of a few hours?

I’m really not sure how so many people expect that Bitcoin can become a real currency when its value is so influenced by a sneak hack-attack of a paltry $65 million. I mean, that’s less than a rounding error on the deferred tax that Apple is housing in its offshore shell companies (if you’re interested, it’s about 0.1% of it).

But here is something even more concerning:

  1. 90% of Bitcoin trades now come out of China.
  2. 70% of Bitcoin’s mining power now sits China.

In a deeply ironic twist, the world’s first free market currency has found itself entrenched in the world’s largest state-controlled economy. Although I guess it’s not that ironic: wherever you have state control, you have attempts to circumvent it. So it’s not too surprising.

But still, taking a bet on Bitcoin now effectively means taking a bet on China.

Here’s a quote from Bloomberg:

Bitcoin’s volatility, meanwhile, has attracted China’s horde of speculative individual investors, who are keener than ever to diversify out of yuan-denominated assets after a shock devaluation in the nation’s currency last year.

And while we’re at it, let’s remember what happened to China’s stock market last year.

Just, you know, some thoughts and concerns.

Happy Thursday.

Rolling Alpha posts opinions on finance, economics, and the corporate life in general. Follow me on Twitter @RollingAlpha, and on Facebook at