This weeks discussion is about how the media portrays alternative currencies such as Bitcoin. A Bloomberg article recently published a headline saying how “bitcoin is better at being gold, than gold,” in terms of not being as volatile as gold. The article quotes “Bitcoin has been a lot more stable than gold, it has evidenced a lot less volatility.” It goes on to cite an article from the wall street journal saying how bitcoin was more stable over a 28 day period. The main problem with this article is that it is false in its conclusion. If you were to calculate out the standard deviation for Bitcoin and gold you would find that gold is much more stable. To be clear, we do not recommend any type of investment in any type of alternative currency due to the high volatility. The author of the Wall Street Journal article said “24 days mark the largest period in which Bitcoin prices have been less volatile than gold prices”. While this is true, this is still only 24 days and the point of that story was to show how volatile the price of bitcoin was. The major takeaway from the bloomberg article is that as things like Bitcoin become more popular, you will most likely see more articles praising the new thing. Unfortunately the facts of these types of articles are often untrue. It is important to not just look at a snappy headline and take it as true, always look at the facts to make your decisions.
Curtis Erickson | 10/04/2017