Take iron. In theory it looks quite a good prospect for currency. It is attractive and polishes up to a lovely sheen. The problem is rust: unless you keep it completely dry it is liable to corrode away.
Baidu Inc (ADR) (NASDAQ:BIDU) has stop transactions in Bitcoins after China’s Central bank banned transactions in the financial institutions as its value is likely to be depreciate. On BTC, which is considered as most active online currency exchange platform, the Bitcoin depreciates by more than 20% to 4800 yuan ($790).
Like the internet, bitcoin is a force of nature which governments control at their own peril. This time around on the Keiser Hangout, our panel answers your questions about the premier crypto-currency, silver’s silver lining and the future of China.
It was inevitable that a few short days after Wall Street lovingly embraced Bitcoin as their own, with analysts from Bank of America, Citigroup and others, not to mention the clueless momentum-chasing, peanut gallery vocally flip-flopping on the "currency" after hating it at $200 only to love it at $1200 that Bitcoin... would promptly crash. And crash it did: overnight, following previously reported news that China's Baidu would follow the PBOC in halting acceptance of Bitcoin payment, Bitcoin tumbled from a recent high of $1155 to an almost electronically destined "half-off" touching $576 hours ago, exactly 50% lower, on very heave volume, before a dead cat bounce levitated the currency back to the $800 range, where it may or may not stay much longer, especially if all those who jumped on the bandwagon at over $1000 on "get rich quick" hopes and dreams, only to see massive losses in their P&Ls decide they have had enough.
Publicity from US Senate hearings and a black-market website that used the currency saw the value of Bitcoin skyrocket from $13 in January to $1,242 on November 29 - higher than the price of gold at the time. The currency is stored in a digital "wallet" and is "mined" by computers solving mathematical puzzles. But on Saturday the value of the crypto-currency plummeted to $830 on BTC China, the world's largest Bitcoin exchange by trading volume, after China banned its banks from providing related services and products on Thursday. Data on the Bitcoin Charts website shows that about one-third of the world's Bitcoin transactions are made on the BTC China exchange, which is open only to Chinese users.
Having discussed the advantages and disadvantages of the crypto-currency and noted the extreme volatility of the last few weeks, it seemed only a matter of time before some ambitious entrepreneur tried to monetize the volatility. What better way to "manage the risk" of your virtual currency horde than buying (or selling) options (in a more levered way). Predictious, the Dublin-based prediction market, this week unveiled Bitcoin Option Spreads enabling both long- and short-positions to be constructed on the already extremely volatile 'asset'. Regulatory clamp-down in 3..2..1...
jean lievens's insight:
Bitcoin copies all vices of the old system; what a terrible lack of imagination
Bitcoin, the virtual money former Federal Reserve Chairman Alan Greenspan called “a bubble,” was accepted as payment in the purchase of a Tesla Motors Inc. Model S electric car at a California Lamborghini dealership.
Instead of embracing Bitcoin, PayPal could create their own payment processing system using the source code used to create Bitcoin. The idea of wallets, fast confirmations of transactions, anonymity of the users will be preserved. Instead of a coin payment to the miners, offer to pay them in dollars.
As a distant but interested observer of history and investment markets I am fascinated how major events that arose from longer-term trends are often explained by short-term causes. The First World War is explained as a consequence of the assassination of Archduke Franz Ferdinand, heir to the Austrian-Hungarian throne; the Depression in the 1930s as a result of the tight monetary policies of the Fed; the Second World War as having been caused by Hitler; and the Vietnam War as a result of the communist threat.
The relationship between credit supply and spending should be basic economics. If the orthodox approach means we can't spot it when it's going on right before our eyes, then that approach is lacking. This is the problem with not taking the pluralist view in economics. Economies are by their nature too complex to be captured by any one method of analysis. All any approach does is provide us pointers and clues to help see what is going on. Ignoring those that seem to contradict our preferred worldview can blind us to what is really going on.
In short, bitcoin is a hot bubbling virtual currency. Think PayPal, where you can send money to your lover without your husband knowing, and buy her crystal meth. The problem is, PayPal has real, traceable money. Bitcoin is private and anonymous making it a haven for illegal activity. And while a chunk of bitcoin transactions are surely used for illicit trade, most politicians and one college is now treating this better than gold.