After my post on Bitcoin last March [Grey Market Staffing, Bitcoin and the Cypriot Bank Raid], a staffing prospect visiting us from Ohio commented that factors propelling Bitcoin – inflation, climbing debt, government seizure – worried her.
She reasoned that unlike businesses with substantial fixed assets, her wealth remains tied up in accounts receivable and cash and a currency crisis would deliver a disproportionately hard hit. If, for example, the dollar were to lose half its value, she would lose half her wealth. And if inflation began running at say 10-20% per month, her receivables would lose a lot of their value on an ongoing basis.
Adding to the drama is the wild ride Bitcoin has been on ride since that March post, flying up from $60/BTC to $250/BTC and then almost immediately falling all the way back down. However, it has since increased more than tenfold and is currently trading above $800.
We haven’t been hearing a lot about a currency crisis lately, but the Fed has been buying bonds at an $85 billion per month rate for quite a long time. That money, almost $3 trillion, is supposed to be stimulating the economy and ‘creating jobs’, however, most of it is sitting in Wall Street banks thanks to QE3. Conspiracy theories abound.
Inflation, however, isn’t the major factor driving Bitcoin prices right now. Instead, it’s the rapid pace of movement to an internet economy and a world in which a lot of extremely wealthy people from Chinese government officials to drug cartels are using the digital currency to launder money. The tech world was rife with speculation this weekend about a mysterious $147 million Bitcoin transfer.
My guess is that most staffing businesses will ignore this inflation angle and won’t think too much about Bitcoin until their big, tier one clients start demanding they accept it. It will be dropped on them like EDI (electronic data interchange) was in the early 1990s when a lot of Mom and Pop’s with blue chip accounts were caught flat-footed.