As Bitcoin’s popularity grows, so does talk about its standing as legal tender, but there are lingering issues that need to be sorted out before people start using Bitcoin to buy everyday things, experts said on Monday.
Because of the way the currency is tied to the value of the U.S. dollar, anyone who uses BerkShares receives a five percent discount over those using U.S. dollars. Although users can buy 105 BerkShares for $100, “We take your BerkShares at the same value as U.S. dollars, and we spend them as U.S. dollars. And it stays in our community, because there’s a geographical limit to where you can redeem BerkShares,” said Brian Butterworth, director of sales at the local Red Lion Inn.
The advent of a new medium to conduct business inevitably means avenues for criminals to swoop in to take advantage. The development of Bitcoin, the virtual currency that is not issued by any government, presents challenges for the authorities to use laws that were not designed for the digital world to combat illegal conduct.
Bitcoin has been on a rollercoaster ride for most of its four-year history, with a series of dizzying price spikes and stomach-turning plummets, often in close succession. Thursday was no exception, as the digital currency picked up an unprecedented endorsement on Wall Street and a dose of cold water from the Chinese government.
There are still only around $800m of Bitcoins in circulation, a tiny amount in a world economy that moves in trillions, and nothing like any serious currency. It is Bitcoin's sudden, enormous increase in value makes it worthy of attention. Bitcoin is a bubble. It can ask for no better advertisement to be taken seriously. Paradoxically, the path to legitimacy is paved by hype.
Bitcoins have received a bad rap by many economists and journalists. Andrew Ross Sorkin of The New York Times says that bitcoin is, at best, a second-rate version of gold that only people from Mars and presumably other extraterrestrial abodes would take seriously. He also points to the proliferation of bitcoin alternatives, asking if we can “imagine a world in which we all transact with dozens of different currencies every day with different rules?”
Of course, this presupposes that Bitcoin is indeed in a bubble but I think that recent price gyrations show that it is, at the very least, showing the price behaviour of an asset in a speculative bubble. But here the interesting thing to me is something that Robert Shiller, joint winner of the Nobel for economics this year, has pointed out. That one of the things that pops speculative bubbles, one of the things that can actually prevent them forming, is people betting that it actually is a bubble. My contention is that if the Bitcoin market has an absence of these tools then that makes it more likely that we are indeed in a bubble.
Thanksgiving day, while many of us were eating turkey, The United States Patent and Trademark Office (USPTO) published JPMorgan Chase’s (Chase) patent application20130317984, “Method and system for processing internet payments using the electronic funds transfer network.” The application was filed with the USPTO on August 5th, 2013.
The price of a Bitcoin dropped by about 30 percent on Thursday morning, from around $1,200 to about $870 on the trading exchange Mt. Gox. This followed an announcement by the People’s Bank of China that Bitcoins do not “possess the same legal status as currency” and all financial institutions in that country are hereby prevented from using them for that purpose. Reasons given included the fact that Bitcoins are not governed by a central monetary authority and can be acquired or spent without revealing one’s identity.
Note that neither the paper nor the slide presentation themselves exemplify the Lakoffian approach; Mitchell and Connors do not, as the techies say, eat their own dogfood. Rather, the paper and the slides lay out a research program in political economy; emphasis political (and how not?)
Over the past couple of months, there have been a few Bitcoin app rejections by Apple that have made some waves. First, the venture-backed startup Coinbase had its app removed entirely from the App Store. Today, a blog post from peer-to-peer messaging and payments app Gliph highlights its own rejection and the subsequent removal of its ability to transact in Bitcoin.
Bitcoin is nothing. It’s dot-com mania 3.0 just moved one step over, right? People are so enamored with communication with their phones and online commerce and all of that. Now they’ve invented what they call a currency to mess around with it, and people are speculating in it the same way they speculated in this other crap. It’s not a currency at all, it’s a complete joke.
The last several days have been particularly volatile for new watchers to Bitcoin. The price of Bitcoin peaked out at over 1.2 mBTC ($1,200 / Bitcoin) on the fourth, but following warnings from the People’s Bank of China, the price tumbled to .576 mBTC ($576 / Bitcoin) before correcting upwards to .860 mBTC ($860 Bitcoin) on Sunday morning trading.
The dollar is the currency to watch next year for a less exciting – though no less impactful – reason: the likelihood of it strengthening is much higher than weakening, and that appreciation will hurt multinationals that are not prepared. What makes the challenge greater is that the dollar won’t strengthen equally across the board, but will against some currencies that mean quite a bit to corporations.