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I do not have a position of any kind in Bitcoin. I have long held long positions in some of the semiconductor names that mine blockchain, so I guess it is safe to say that I have seen some benefit from that kind of exposure. That said, how does one even go about valuing Bitcoin, or any cryptocurrency? Its value, like that of fiat currency, is based on faith more than backing; but unlike with fiat currencies, there is no real evidence of acceptance as a medium of exchange.

When one walks into the local pizza parlor, it is generally understood by both the consumer and the merchant that a certain number of U.S. dollars will allow that pizza pie to change hands. Both sides probably have a fair idea of what this pizza pie is worth in those U.S. dollar terms. Now, try the same transaction with any cryptocurrency. Odds are very high that there will be no transfer of said pizza pie. In fact, the consumer would have better odds of making a deal with the merchant using foreign issued fiat, or even bartering with jewelry, than being able to use a non-national "sort-of" currency that not everyone understands, and could be worth literally anything minutes after the pizza leaves the shop.

That said, nothing surprises me. The more that regular people hear about the incredible run of bitcoin, and the longer it takes for this financial instrument to trade even in derivative forms more broadly on regulated exchanges, the longer it will take for bitcoin, or any leading cryptocurrency, to trade like a well-oiled machine.

This forced "scarcity" allows for incredible volatility. You may see prices at very scary levels, if you do not already consider $11,000 to be a scary level. The fact is that I believe increased participation will allow for eventual price erosion, as it simply becomes easier to get out of long positions, and even create short positions. Then again, how would you margin something like this? I would not at all be surprised if Bitcoin traded below $2,000 in less than a year's time. Then again, I'm primarily an equities guy. What do you think? I really do want to hear from you on this. Twitter has been interesting.

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(This is an excerpt from Stephen "Sarge" Guilfoyle's Morning Recon, which now appears exclusively on Real Money, our premium site for active traders. Click here for a free 14-day trial and receive Morning Recon every day, along with exclusive columns from Jim Cramer, James "RevShark" DePorre, technical analyst Bruce Kamich and more.)

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At the time of publication, Stephen Guilfoyle had no positions in the stocks mentioned.