Crypto Currency

My Thoughts on Last Night’s BTC Crash and a Guest Post on “Why Bitcoin Will Succeed”

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I haven’t seen action in Bitcoin like we saw last night since earlier this year in the spring when the price went from $10 in January to $260 in April, and then crashed down to $50 before stabilizing in the $80-$120 range for months before beginning the latest parabolic move. I was so taken by the action in BTC China last night that I wasn’t able to sleep until 5am Rocky Mountain time, trying to buy what I could at the best prices possible. I saw every single tick. It was a crazy evening.

Yesterday I posted that while I thought BTC was at the lower end of the range at $650, there was the potential for some near-term headline risk. I thought that it might come from the U.S. banking system, but instead it came from China when they banned new renminbi deposits into the leading global exchange BTC China. While I am not saying that the price will now quickly launch to new highs, there was complete and total panic in the air last night. No question about that. In addition I tweeted that:

Now I think we have a much more positive setup going forward, although a similar period of consolidation such as we saw earlier in this year is likely. The news out of China cannot get any worse, and BTC China as far as an exchange and price discovery mechanism is basically dead. The big risk now is that other nations take similar actions, but the sentiment is now sufficiently bad and people expect bad news. Last night represented the most BTC I have bought since the spring crash.

In light of all this, a reader of my blog going by the handle Anon Wibble posted an excellent comment and I have decided to republish it here. Would love to get reader feedback as well. Enjoy!

Bitcoin will prevail. This isn’t just another e-currency, this is an entire framework for communicating information and money unlike no other ever before. This is the biggest revolution since linux and the more you use bitcoin the better and more complex you realise it is.

Look at the following things:

1) bitcoin can do everything a bank can do

2) while it’s true that unlike credit cards, btc has no way to chargeback claims, also consider that in the past chargeback scams have defrauded business through payers likes paypal etc. Chargeback doesn’t prevent fraud at all, it moves the person being defrauded from one person to another. Also consider that escrow services do chargeback for far cheaper than credit cards do.

3) bitcoin isn’t just a currency it’s a protocol that can be used to exchange information, nowhere in the headlines is this even mentioned files and information can be exchanged through bitcoin nobody has even looked at this yet

4) JPMorgan wouldn’t have tried to patent their own version of bitcoin 170 times, if they didn’t think crypto currency wasn’t the future

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Producer of Physical “Casascius” Bitcoins is Being Targeted by the Feds

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Meet Mike Caldwell. He is the maker of what seems to be the most popular physical bitcoins on the market, the Casascius coin. All Mr. Caldwell does is have people who want the coins produced send him a certain quantity of bitcoin and then for a $50 fee he puts the private key on a physical coin and sends them back. For this horrible crime of ingenuity and creativity, the U.S. government naturally, has decided to target him. Because they are too busy ignoring the real financial crimes happening out out there…

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From Wired:

Mike Caldwell spent years turning digital currency into physical coins. That may sound like a paradox. But it’s true. He takes bitcoins — the world’s most popular digital currency — and then he mints them here in the physical world. If you added up all the bitcoins Caldwell has minted on behalf of his customers, they would be worth about $82 million.

Basically, these physical bitcoins are novelty items. But by moving the digital currency into the physical realm, he also prevents hackers from stealing the stuff via an online attack. Or at least he did. His run as the premiere bitcoin minter may be at an end. Caldwell has been put on notice by the feds.

Just before Thanksgiving, he says, he received a letter from the Financial Crimes Enforcement Network, or FINCEN, the arm of the Treasury Department that dictates how the nation’s anti-money-laundering and financial crime regulations are interpreted. According to FINCEN, Caldwell needs to rethink his business. “They considered my activity to be money transmitting,” Caldwell says. And if you want to transmit money, you must first jump through a lot of state and federal regulatory hoops Caldwell hasn’t jumped through.

But HSBC launders billions for Mexican drug cartels and they can continue their operations no problem.

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Coinbase Raises $25 Million from Andreessen Horowitz in Largest Bitcoin Investment To-Date

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As I tweeted at the time, I think Bitcoin began phase two of its growth and adoption cycle upon the conclusion of the Senate hearings last month (I suggest reading: My Thoughts on the Bitcoin Hearing). I think phase two will be primarily characterized by two things. More mainstream adoption and ease of use, as well … Read more

Fidelity Now Allows Bitcoins in Your IRA

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*Note: Since I published this article, Fidelity has come out and said clients cannot invest in bitcoins in their IRA. I suppose somebody received a phone call. Well this is simply huge. As much as many people want Bitcoin to simply go away (see my recent interview on the topic with Miles Franklin), it is … Read more

Inaugural Interview with Miles Franklin – Gold, Bitcoin and Oligarch Theft

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Last week, I sat down for a chat with my fellow Coloradan and friend Andy Hoffman, Media Director for precious metals dealer Miles Franklin. Many precious metals focused people have taken a very aggressive, and in my opinion ignorant and short-sighted negative perspective on Bitcoin as of late. I personally feel that this is rooted … Read more

In California, A Tesla Has Now Been Bought with Bitcoin

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I’ve been waiting for this headline. It was just a matter of time before the exchange of BTC for a Tesla happened. The purchase took place at  Lamborghini Newport Beach in California, and this isn’t just a one time gimmick. The dealership has announced that: Lamborghini Newport Beach in California is proud to announce that we … Read more

Erik Voorhees Responds to Peter Schiff’s Bitcoin Criticism in an Open Letter (This is Excellent)

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Last week, Peter Schiff put out a video titled: Bitcoin vs. Gold, which quite frankly was horrible and one of the worst videos he has ever done. It added nothing the the debate that everyone involved in Bitcoin isn’t already completely cognizant of, but even beyond that, it framed the debate around Bitcoin in a totally unproductive and useless way. The reason I say this is because the debate is not Bitcoin vs. Gold, the debate is Bitcoin vs. Fiat Money. Gold is a store of value that has survived as such for thousands of years and and has also served as money for a decent part of human history. Gold will never be worth zero, Bitcoin could certainly trade back to near zero some day. We all know this.

So the key point from my end is, Bitcoin is not competing as a store of value versus gold, it is competing as a currency versus fiat money, and on that count it is superior in an extraordinary number of ways. His video was so awful that I challenged him to a debate on his radio show on Bitcoin via Twitter.

 

He never responded to me, but fortunately he did have Erik Voorhees on his show to discuss the topic. While I have not listened to the show because apparently you need to be a subscriber to Schiff’s radio show to hear it, Erik Voorhees wrote a follow up open letter to Schiff afterwards. All I can say is that this is one of the most eloquent, incisive and thoughtful articles in support of Bitcoin I have ever read.

I have republished the entire thing from Reddit below (emphasis added by me):

An Open Letter to Peter Schiff A follow-up to the discussion on the Peter Schiff Show, December 2, 2013 (this has been emailed to Peter just now)

Dear Peter,

It was a privilege and an honor to be a guest on your radio show today. I’ve been a fan of yours for more than five years; you were one of the reasons I discovered Austrian economics (and, in turn, Bitcoin), and your eloquent explanation of consumption vs. production in an economy has guided my outlook of the world ever since. So thank you sincerely for what you’ve taught me, and for the opportunity to appear on your show. It was a really special moment for me.

While we had some valuable discussion today, I felt a follow-up was appropriate to better articulate my points. You’re right to be highly skeptical of such a new technology and monetary system, but please take the time to ensure your skepticism doesn’t blind you from what I humbly suggest is one of the most important tools for human freedom ever conceived.

The Fundamentals

First, Bitcoin must always be considered as two things: the payment network (Bitcoin) and the currency units (bitcoins). Condemnations of the latter can often be resolved with an understanding of the former. Satoshi should have named them differently to avoid this initial confusion.

When you suggest that bitcoins have “zero intrinsic value,” you are only considering the currency unit itself and ignoring the payment network. While I prefer the term “utility” over “intrinsic value” (because all value is subjective to the valuer), I may indeed admit that bitcoins, as currency units all by themselves, have no fundamental utility and are completely uninteresting. But – and this absolutely critical – the payment network has vast utility.

In fact, this network is probably one of the most valuable and consequential technologies currently on the planet. Some of us realized this a few years ago. Others are realizing it now. Many more will realize it in the future. The Bitcoin network is, fundamentally, a ledger of title controlled by no man. Ponder that for a moment. The transmission of value and ownership has thus just been severed from the State, not by impotent voting, but by the technological achievement of man.

Now, during the show, you agreed that perhaps this payment network has utility. So, if the network (Bitcoin) has utility, and only one currency is accepted on this network (bitcoins), and those bitcoins are scarce, then should not those units themselves command a market price? Who knows what that price should be, but there should be a price, no?

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Picture of the Day: The Bitcoin Black Swan

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Yep, this pretty much says it all. Take that Banksy.  * I have no idea who created this image and where it came from, but great job to whoever made it. Like this post? Donate bitcoins: 35DBUbbAQHTqbDaAc5mAaN6BqwA2AxuE7G Follow me on Twitter.

You Can Now Buy a Plane Ticket with Bitcoin

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Of all the Bitcoin adoption news that has emerged over the past couple of months, this is far and away the most exiting to me. Purchasing airfare is something that most people do at least once a year, and with the holidays coming up, something that is at the forefront of many people’s minds. The … Read more

Bitcoin or a Bank? Here’s How They Stack Up

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The following graphic was put together by the folks at Promontory Financial and is extremely telling. It looks at three ways in which a U.S. citizen might choose to go about sending a $1,000 downpayment to Europe for the purpose of renting a vacation home. They put Bitcoin side by with with a traditional bank … Read more