I'm not sure I quite understand. As with the purchase of any asset, the most you can lose is 100%. If you exchange $600 for one Bitcoin or $600 for 6 Yen, in both cases the most you'll lose is $600. The only difference is that Bitcoin fluctuates more than JPY. The comparison to biotech stocks is valid - there is the potential (however small) for Bitcoin to be a game changer and replace fiat currencies as a medium of exchange. If that's the case, then $600 is cheap.
not a big deal. ....my first question was hypothetical in that it started with "if"....how much would you invest in bitcoins. What I meant from affirmative response was that lets assume you would have said you would put 3% of your networth in bitcoins, but you haven't taken a position yet - so my question was why have you not taken the position, if you want to.....is it because its hard to trade bitcoins, hard to cash out etc. etc. Never mind.....
One of the reasons someone might transact in bitcoins is to go under the radar of money movement from one place to another. Is it accurate to say that one might buy $1MM of bitcoin @ $10.. that is to get 100K bitcoins for $1MM.. then at some later date to exchange the 100K bitcoins for $60MM @ $600/bitcoin? If so, that ain't a "currency exchange transaction"... that's something else entirely.
OK - I can probably give a better answer now: I would give some consideration to trading BTC (both long and short) if it was possible to trade it using an online stockbroker. As you might know the Winklevoss twins are trying to get SEC approval for a Bitcoin ETF: http://www.sec.gov/Archives/edgar/data/1579346/000119312513279830/d562329ds1.htm You're right, the logistics of trading Bitcoin (not available at stockbrokers) is off-putting.
We're just disagreeing over the semantics of what is and isn't "currency exchange". Suppose a Japanese person is concerned about Hyperinflation today, and they exchange their live savings of 10 million Yen into US Dollars. Then Japan experiences hyperinflation and USD/JPY goes to 6,000. She then sells her USD and gets 600 million Yen. This is similar to your example to buying bitcoin at $10 and selling at $600.
You're missing the *big* feature of bitcoins - built-in scarcity. There's a finite number of bitcoins that can be created. Each ensuing bitcoin created (i.e. mined) is x% more difficult than the previously mined coin. I believe x% also increases with each mined coined - it's not static, either. As long as the perception of demand exceeds the supply, the "value" is pretty much a one-way street - up. If the US and other gov't kill the demand (by killing the ability to convert BTC into dollars, euros, etc or enacting methods to thwart/tax private barter transactions), the value will plummet. Bitcoin is like any other fiat currency - backed by nothing except belief in it's value. Bitcoin FAQ
Oh yeah.... just like tulip bulbs in the 1600s. It's LUDICROUS to believe $1 USD can rationally be converted to $50 USD simply because it was washed through a bitcoin transaction. However.. seems to me, that's how it works. And if so, it's a game for the stupid and naive.
Currency transactions are "exchanging one money for another at a given time based upon the then conversion rate".... which doesn't fluctuate much over short terms of time... nothing like 50X. Why should a bitcoin be worth 50X what it was 2 years ago??. The currency used to buy it didn't depreciate by 98% during that time.
Like I said in earlier posts, investor perception changing regarding the possibility of it becoming a viable currency in the long-term.