It does sound so to me. There doesn't actually seen to be any money in the system, so I do wonder how the coins have real monetary values attached to them.
Bitcoins have proven utility, for buying drugs.
Here's a 2011 article on the subject:
http://gawker.com/5805928/
Basically, say:
1 gram of cocaine is worth £100, delivered to your door
In order to buy that gram of cocaine, it will cost n bitcoins.
Now the volume of illegal drugs sold using Bitcoins is estimated at around £20 million per year.
There are around 10 million bitcoins in existence, and the velocity of many of these coins is zero, because they are being hoarded.
So only a fraction of the bitcoins in existence is actually being used.
Further, if someone wants to buy drugs using bitcoins, because they will need to launder their money a little first, they will probably find it inconvenient to buy bitcoins using cash for each purchase, but instead will make larger purchases.
E.g., instead of buying £100 worth of bitcoins for 1g of coke, you might buy £500 of bitcoins, leaving you with some for next time.
So you have a number of bitcoins sitting in a wallet, which have some utility to you, but they aren't going anywhere very quickly, because you are perhaps not buying that regularly.
The drug dealer too, who receives the coins, might be selling £20k/month of drugs, but he doesn't cash all that out perhaps to avoid scrutiny because it's difficult to get that much cash out, so there are a whole bunch of bitcoins in his wallet doing nothing also. The value of each bitcoin is therefore determined by the number circulating, and the speed with which they are bought and sold (each new drugs buyer will buy more btc, and because the number of buyers exceeds sellers, the price therefore rises).
The bottom line is that the coins are definitely useful for drug dealing, and over time the volume of drugs being sold will increase and therefore the price of BTC increases too. OTOH, there are unknown millions of BTC waiting in speculators wallets, for the chance to sell, and when prices get high enough, they are likely to sell. Because early participants received $millions of bitcoins for nothing, bitcoin is extremely risky, because nobody has the first idea about how many btc are actually circulating, and how many are hoarded by early adopters.
If for example 1m btc circulate, and 9m are hoarded, then that spells a huge risk for any johnny-come-lately speculator buying in at 10,000x times the price paid by early adopters, because those early hoarders, may very reasonably decide that they can turn their millions of bitcoins into $$$, and hence into yachts, mansions, and so on, whereas the bitcoins themselves aren't much use - there's only so much smack anyone needs.
Despite what proponents claim, bitcoins have very little utility, and cash although losing its value over time, is still going to be worth over 90% of its current value in a years time.
There is of course greed motivating almost all the speculators, those buying in at $150 see the rise from $15 and want it to go to $1500, those who bought in at $0.015 could see $150 and think 'I'm rich now, but I want to be Bill Gates', and so on, but large 'bigger sucker' sales at prices that will make the big holders fabulously wealthy are absolutely the only rational choice.
If you bought 10BTC at $150 = $1500, and the price goes to $300 = $3,000, or $750, then neither movement has made you poor or wealthy, and you can just let it ride.
If you bought 15000 BTC at $0.10 in 2010 = $1500, then at the peak of $240 yesterday, you had $3.6 million. At that level it would be very stupid not to sell because there is nothing underpinning those values - bitcoin generate no income, and the fundamental price is not clear.
As long as there are more speculators willing to buy in, then the price can continue to rise, but if the early adopters cashing out their multi-million dollar gains continue to sell, the money velocity will increase, because the new buyers are speculators, and are likely to panic sell, take profits, etc., and because the money is divided between many market participants.
So instead of perhaps having 1 million of BTC available to buy drugs, because of the sales of early hoarders, the amount of BTC available to buy drugs might increase to 3 million BTC, and if $15 was a justifiable price previously based on the amount of BTC circulating compared to the volume of drugs being sold, then the new justifiable price would be $5.
And of course if the drug dealing got shut down, then the price might fall to zero.
Either way, those with long-held large bitcoin holdings at this point are very rich and rationally should sell. The effect of speculators wanting to buy in at 1000x their buying price and also get rich (from an even bigger sucker) isn't clear, but what is clear is that it is absolutely irrational to put any significant amount of your personal wealth into bitcoins.
)
funny that.
