Wall Street Sees Bitcoin’s Legacy as Payment System: Currencies - Trading stocks, futures, options and other exchange instruments

thenews 2014.01.16 13:48 #111

Wall Street Sees Bitcoin’s Legacy as Payment System: Currencies

While a Texas Senate candidate is accepting Bitcoin campaign donations, and Overstock.com customers can use the technology to buy engagement rings, Wall Street sees its future more as a payment system than a currency.

Either way, it’s been a profitable investment. Created in 2008, Bitcoin’s value took off last year, leaping about 60-fold in the past 12 months to $936.51 yesterday, with prices ranging from $16 to more than $1,200, according to bitcoincharts.com. Gold plunged 26 percent in the same period, while the second best-performing major currency, the 18-nation euro, climbed 7.3 percent versus a basket of its major peers.

While its supporters have embraced Bitcoin as an alternative to currencies vulnerable to sovereign debasement, China’s central bank has banned lenders from handling the virtual money and Finland’s authorities said it lacks the characteristics of a real currency. Citigroup Inc., the second-largest foreign-exchange trader, said Bitcoin could benefit society if it eases transactions, even though about 1 percent of owners hold some 80 percent of the digital money.

“Bitcoin, in essence, is just an evolution of a payment system,” Sebastien Galy, a New York-based senior foreign-exchange strategist at Societe Generale SA, said by phone Jan. 14. “The ultimate concept of transaction, the innovation, is certainly progress in the means of transaction.”

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name 2014.01.16 21:44 #112

What is all this fuss about bitcoin? After all they can launder money using smarter ways. Sooner or later it will become public and sooner or later they are going to have to pay the taxes.

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thenews 2014.01.16 22:45 #113

$10: One Perspective On What Bitcoin Will Be Worth In 2014

The Wild West has become a popular metaphor for the unregulated Bitcoin market. Like in old cowboy films, the world of Bitcoin has not only miners and modern a gold rush, but the requisite intrigue, volatility and power players that make a compelling story.

As the currency-commodity-technology’s true character comes to light, however, at least one finance expert feels it is set to drop to as low as $10 by the middle of this year.

Bitcoin began 2013 at $13 a coin, only to ring in 2014 around $800 with worldwide fascination driving the 60-times gain. But according to Boston University Finance Professor Mark Williams the price has really been driven by an influential few. Just 47 people own 29% of all outstanding Bitcoins; 930 own 50%. Another 10,000 folks bring the total owned by the largest coin holders to roughly 75%, leaving a sliver to be split among about 1 million small-change Bitcoiners.

Williams, a former trader and bank examiner for the Federal Reserve, argues that in 2013 the 47 powers coordinated to push prices up. They counted on what economists call Greater Fools. Investors make money when someone is willing to pay a higher price for a security than you did — Greater Fool Theory states that there is always someone willing to pay a higher price. But Williams sees the broader market wising up to Bitcoin’s limitations and taking back control in 2014.

Bitcoin is not a stock, a bond or even a legal entity. No board or directors oversees it. There are not business plans or balance sheets. This lack of centralization is why the die-hards got involved in the first place, but even as they drown out negative sentiment, the original Bitcoiners are turning against their original vision.

“Understand how they acquired these coins,” urges Williams, “many of them were miners and they turned into speculators.”

Miners bring new Bitcoins into the world via a complex mathematical and computing process. So far 12 million Bitcoins have been mined. By 2140 there will be 21 million Bitcoin at which point creating more will become impossible. While most miners got into the space thanks to an interest in the technology and anti-institution philosophy, as the price of Bitcoin has risen they have begun stockpiling their coins gaining a tight grip on the market. Currently over 90% of Bitcoins are hoarded.

“If you hype demand the small incremental amount that is available for sale set the price,” says Williams. “That’s not an efficient market, that’s an inflated market, a market that is misled with false information. I think the market mechanism right now is being interfered with.”

As these facts and questions enter the wider consciousness, as they have begun to, Williams feels smaller Bitcoin investors will pull out. “When these million people stop buying at these high prices, that’s when the house of cards will start falling price wise.”

In the future, Williams sees the Bitcoin name living on as shorthand for digital currency at large – like people call tissues Kleenex and photocopies Xeroxes. While Bitcoin proper may maintain a small amount of value as a virtual commodity, he expects smaller local tenders to dominate the digital currency space. Others will learn from the flaws of Bitcoin to make something with a greater chance of adoption and less volatility. “There is a very low, to no, barrier to entry,” says Williams. “ provided open source. It’s a decentralized system, and because it’s open it’s free. They have actually given the technology away.”

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thenews 2014.01.18 08:08 #114

The U.S. government's bitcoin bonanza: How, where and when to sell?

U.S. prosecutors in Manhattan are sitting on a multimillion-dollar bitcoin gold mine. And it could get much bigger.

Federal authorities hauled in 29,655 units of the digital currency - worth $27 million at current exchange rates - through an official forfeiture by Bitcoin this week.

The bitcoins had belonged to Silk Road, an anonymous online black market that authorities say was a conduit for purchases of drugs and computer hacking services - even a place where assassins may have advertised. It was shuttered after an FBI raid in September, when agents took control of its server and arrested the man they say was its founder in San Francisco.

No one stepped forward to claim these bitcoins, which were found in electronic "wallets" used to store the digital currency. An additional 144,336 bitcoins, worth more than $128 million today, were also discovered, but the government's claim on them is being disputed by Ross William Ulbricht, 29, who U.S. authorities say was the founder and main operator of Silk Road. They had been stashed on his laptop.

It all puts authorities in an unusual position, given their concerns about the way in which bitcoins and other digital currencies are used by criminals to circumvent regulations intended to prevent money laundering. By trading in bitcoins, the government could give the currency some legitimacy.

Bitcoin is essentially software code that defines units of value, which users can move back and forth among themselves. Unlike other virtual money transmitters, its value isn't pegged to a hard currency like the dollar or the euro; it is determined by the demand for bitcoins.

The U.S. Marshals Service, which is in charge of liquidating such seized assets, will have to decide whether to sell the units on a Bitcoin exchange or find a private buyer, perhaps through an auction.

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