A friend sent me a very interesting article/blog-post by Xavier Sala i Martin where he gives insights and his view on the boom of bitcoins. Given that I recently wrote about bitcoins, I thought it would be a good idea to share it here too. Note that the article is in Spanish:

La burbuja del bitcoin

My first thought after reading it, aside that it is very interesting and insightful, is that it looks to me like something is left out. (Disclaimer: I know nothing on economics and he is an expert, so I am probably wrong from here on). The article seems to be analyzing bitcoins as a market where the possible operations are to buy and to sell bitcoins. The analysis includes the main constraint of the bitcoin market as well: offer of bitcoins will, eventually, hit a ceiling. In other words, the number of bitcoins that can be generated is limited, unlike dollars, which are injected into a market. However (and, again, I might be wrong), I think that his analysis does not consider a third possible operation: mining bitcoins. He discusses about investors buying and selling bitcoins, but he seems to ignore investors who mine bitcoins. I have to say, though, that I am not sure if that 3rd operation is really differential when it comes to the economic analysis of bitcoins. What I know for sure is that if it was legal to invest in dollar printing machines, world economics would be very different. In the bitcoin market I can invest in machines that “print” bitcoins. Shouldn’t that change things?