This is a fable for the Bitcoin bubble (or not?) that we’re living through this year. Back in 2010, Florida programmer Laszlo Hanyecz talked someone into accepting the 10,000 Bitcoins he’d “mined” on his computer in exchange for two pizzas.
“It wasn’t like Bitcoins had any value back then, so the idea of trading them for a pizza was incredibly cool,” Mr. Hanyecz told the New York Times recently.
In those distant days before twerking went mainstream, Hanyecz estimated that each Bitcoin his computer had earned through basically crunching numbers was worth a fraction of a cent, like the cash value of a coupon you might receive in the mail, only much less.
So at the time, it seemed like something of a coup to score two piping hot pies with money that some software had essentially willed into existence through some fringe mathematical magic.
Then 2013 happened. Speculators, the media and who knows who else got wind of Bitcoin, and the price shot up to over $1,200 at the beginning of December. As of this writing, after taking a hit from a ban on new purchases by the Chinese government, the price is down to about $700 per Bitcoin. If you’ve got your calculators out (or up on your desktop), you already know that Hanyecz’s pizza purchase would be worth about $7 million at current Bitcoin prices. These days Bitcoins are more likely to be accepted for a purchase from Tesla Motors TSLA +2.66% than Papa John’s.
Hanyecz says he isn’t bitter, which is more than I can say for myself. I spent part of the summer playing around with a few hundred dollars on the Bitcoin exchanges. The prices were so volatile it was fairly easy and straightforward to buy low and sell high and ride the waves. I grew my little experiment to a thousand bucks worth of Bitcoin fairly quickly, and then got spooked this fall after it became nearly impossible to withdraw funds from Japan-based Mt. Gox, one of the biggest exchanges around, to a U.S. bank account.
I wound up transferring my Bitcoins to U.S.-based Coinbase and cashing out, only to see the crypto-currency skyrocket to rival the price of gold just a few weeks later. To anyone who knows what Bitcoin is, I have lamented my poor timing loudly and frequently.
Now, some analysts project Bitcoin could climb as high as $10,000 per in the months and years to come. But for now, I’m standing on the sidelines and ordering plenty of pizza, because unlike Bitcoin, I still love a slice of pepperoni, even if I get burned by it on the first bite.