Rubles and Bitcoins.

On August 18, Bitcoins (on bitstampUSD network) hit an intraday high of 510 Bitcoins to USD, and an intraday low of 442 -- a 13.3% difference in a single day. On October 6, the difference between intraday high and low was 19%. From November 13 to today, Bitcoins have declined 30.8%.

In that same period (November 13 to today), the Ruble has declined by 26.1%. In a particularly volatile day last week, the Ruble's intraday high and low spread was 26.2%.

One payment system is asserted as fiat money (without inherent value) while the other is said to hold intrinsic value. Funny then, that both are equally volatile -- and this matters a great deal, whether fiat or not.

Regardless of paper or gold, currency must be relatively stable or else it is not so useful as a payment system. Which is why we're now seeing foreign companies (Apple, GM, Audi, and others) stopping sales in Rubles.

Therein lies a critical problem for Bitcoin: It is not a stable currency; it is not a store of value.

Its backers have said that, over the long haul, Bitcoin will become stable as it gains wide acceptance, and therefore a store of value. Except, Bitcoin is faced with a chicken-egg paradox: Does stability come as a result of wide acceptance or does acceptance come as a result of stability?

It'll never gain stability. As a completely free-market system, its value is fully subjected to perfect supply-demand elasticity. Panics and bubbles have no limits whatsoever. The mechanisms for stability, such as monetary policy, are absent, and in fact, loathed by free-market purists.

Of course, these Bitcoin fans will point out, then, that the Ruble has shown that stability mechanisms have failed Russia. Except, Russia's problems are multiple, stemming from crony capitalism and a flight from the Ruble by the same people who most benefited from Putin's cronyism.

Furthermore, Bitcoin fans have not shown why Bitcoins are better than sovereign paper currency. All they've shown is that Bitcoins are no worse than the worst currency stuck in a currency crisis -- and that should say something about Bitcoins.