Tag Archives: Bitcoin

morning-coffee

Could Bitcoin Win Over Mainstream?

With news that Ebay is now considering accepting Bitcoin as payment, could this pave the way for other large e-commerce giants to follow suit? A final decision has yet to be made pending clarification on the regulatory framework but the company’s interest in the digital currency is evident following one of PayPal’s CEO David Marcus’s recent tweets: “We treat BTC and any FX the same way. We’re believers in BTC though.” Next month, both eBay US and eBay UK will allow its customers to buy and sell Bitcoins for the first time.

The news comes at the same time as Google let slip that it is exploring possible Bitcoin integration plans. Although it hasn’t yet incorporated Bitcoin into any of its products, Google has been more enthusiastic than many other tech firms. So far at least, online retailer Amazon has said it has no interest in using the virtual currency. Apple hasn’t allowed a single Bitcoin client into its iOS app store either - although dozens of Bitcoin wallets are available for Android. But for Google, Bitcoin integration could offer a boost to the company in its digital payments competition with Paypal. Overstock.com recently illustrated the buzz that Bitcoin adoption can generate when it received $130,000 Bitcoin sales in its first day of accepting the currency, mainly from new customers.

The list of Bitcoin vendors is growing every day and with the big e-commerce giants now taking it seriously, Bitcoin could really start to establish itself in the mainstream economy. As things stand, most businesses factor the fees for their payment processors into the price of their products or services. Accepting Bitcoin would allow them to cut out the middlemen and thus reduce their transaction fees… and with the world’s first Bitcoin ATM located in Vancouver already in operation, you can’t help thinking that it won’t be long before Bitcoin transactions will become as natural as those by credit card, only cheaper!

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Bitcoins

EU Trying to Patch Up Holes in Virtual Wallets

Be warned that there’s a hole in that e-wallet of yours! Will EU regulation comes in to patch things up?

The European Banking authority issue a report today advising consumers to take the dangers of cybermoney more seriously with digital thefts having exceeded $1 million and traders being entirely unprotected in a case of a virtual currency collapse.

Bitcoin and other virtual currencies have come under close scrutiny lately with both favourable and not-so-favourable treatment by national banking authorities. While the U.S. senate added bitcoin under the umbrella of traded currencies, the central bank of China prohibited that financial institutions deal in Bitcoins, while in Germany two suspects were arrested for fraud in an investigation regarding the illegal issuing of Bitcoins worth 700,000 euros ($963,000).

The EBA noted in a statement published on its website: “Should the popularity of a particular virtual currency go down, for example if another virtual currency becomes more popular, then it is quite possible for their value to drop sharply and permanently.”

The virtual currency Bitcoin emerged in 2008 and exist as software under the control of no government or central bank. The identity of the programmer or group of programmers that designed the currency, going under the name Satoshi Nakamoto, is still unknown.

The price of Bitcoins exceeded $1,000 when the U.S. law enforcement and securities agencies proposed in a Senate hearing last month that it be considered a legitimate means of exchange. Investors anticipated that the positive publicity would widen the use of digital money.

Nevertheless, prices have since dropped to around $866 on Bitstamp, a Slovenia-based online exchange. According to Bitstamp, it would cost around $10.5 to purchase all the Bitcoins currently in circulation.

The EBA, the 28-nation executive apparatus of the European Union, would have to approve of virtual currencies first in order for regualtion to go ahead. Michael Barnier, the financial services commissioner of the EU, however, said to Bloomberg that they “support the EBA warning to consumers on the risks associated with virtual currencies.”

Furthermore, the EBA noted that people who have virtual currencies in their possession may be have to pay value-added or capital tax gains.

“We recommend that, if you buy virtual currencies, you should be fully aware and understand their specific characteristics,” the report said.

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morning-coffee

Cryptocurrencies: Are They The New Dotcom Stocks?

Cryptocurrencies are fast becoming a buzzword, so are they becoming the new dotcom? There can’t be many of us who haven’t by now heard of Bitcoin…but what about Namecoin, Novacoin or Quarkcoin? Each of the three were up 120%, 185% and 230% respectively last week. And, the biggest mover? That was Craftcoin, up 1,557.8% in one day!

And now, there’s Worldcoin, but they’re currently only worth about 6 pence, so who knows if they’ll catch on? But then again, Worldcoin was only up 21% last week. Its market cap - the worth of the entire currency – is now $3.87m, with about 32.5 million of the coins in existence.

Bitcoin’s market cap meanwhile is about $10.7bn. They’re trading near $900 a piece and there are 12 million of them. It is currently the dominant cryptocurrency, having the first-mover advantage. But you would assume that better cryptocurrencies are bound to come along, ones that copy Bitcoin’s strengths and improve on its shortcomings. How do you know which are the good ones that will thrive? Some will have their own unique selling points. Primecoin helps discover long chains of prime numbers as a by-product of its computing. Namecoin’s supposed to reduce internet censorship. Litecoin is the next biggest after Bitcoin and Feathercoin’s had a lot of publicity.

So, where do you put your money? Cryptocurrencies, as we have previously reported, are exciting but extremely risky. Governments are a potential problem. If cryptocurrencies start to present a threat to ‘real’ currencies, you can be sure governments will fight them through regulation and taxation.

A bigger issue is that while cryptocurrencies remain anonymous, there is no customer protection or deposit insurance. Another worry is the old-fashioned pump and dump. There are more than 90 different cryptocurrencies in existence and anyone can start a currency. Once they exist, users promote them repeatedly. You often don’t know who’s behind a coin so if someone decides to pull the plug and turn the website off, there’s not a lot you can do.

Companies like Google and Facebook came after the dotcom bust. AOL was the leader before - where are they now? Could Bitcoin be the next AOL? Does the Google of cryptocurrencies even exist yet? So, what would you do with your cryptocurrency profits? Buy gold maybe?

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Bitcoin

Get Your Bits Together: Bitcoin Going Mainstream

U.S. Department of Justice gave the green light that sets Bitcoin well on its way to mainstream market in an accelerated rally as it has been deemed a “legal means of exchange.”

The virtual currency, which can be exchanged on the web-based exchange Bitstamp against dollars, euros and other currencies, soared to a record $744 following the hearing by Homeland Security and Governmental Affairs Committee of the U.S. Senate. The new gains come as no reversal to the cryptocurrency’s, but rather fall in line with an exponential growth that has seen its value quadruple in the last two months, and increase 45-fold this year. Chinese interest in the currency and limited supplies have aided the currency’s rapid growth.

After the closedown of the Silk Road Hidden Website last month, on which Bitcoins were used for the purchase of illegal goods such as drugs and guns, many investors rightly speculated that the virtual currency would gain wider popularity. Yesterday, everybody in the U.S. from the Secret Service to the Financial Crimes Enforcement Network put in their two cents about the status of the currency. The main discussion seemed to centre around Bitcoin’s user identity protection, as the software has been built to be difficult to trace, which offers both benefits and great risks.

They may not be tangible things one can put into vaults and pockets and yesterday’s meeting has confirmed that Bitcoins have come into their own and can be considered as real as all other tradeable assets.

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Bitcoins Flying

Bitcoin To Be Legitimised? It’s Washington’s Call

When the Silk Road Hidden Website was shut down last month prospects seemed grim for Bitcoin, the digital currency that was widely used for the exchange of illicit goods (such as drugs and guns) on-line. But initial reactions may have been negatively influenced primarily by shock at the currency’s use in the black market, for the virtual currency is to stand before the U.S. Senate later today, just six weeks after the Silk Road fiasco.

Monday’s session, which involves the Senate Homeland Security and Governmental Affairs Committee, bears the title “Beyond Silk Road: Potential Risks, Threats and Promises of Virtual Currencies,” is expected to look at all virtual currencies to determine their legitimate place on the market, but Bitcoin will most definitely steal the limelight as the most popular cryptocurrency, the term used to describe the new category of virtual money.

The thorough testimony, which covers questions from the basic “What are bitcoins?” to the more financially complex “How do they differ from other virtual currencies and/or market assets?” attest to the seriousness with which the Senate plans to review the topic. Reports that have been released ahead of the meeting, in any case, indicate that the Department of Justice and Securities and Exchange Commission will be supporting Bitcoin as a legitimate financial instrument, opening the way for wider acceptance of the currency on the mainstream market, while pre-empting investors’ concerns relating to the currency’s unfortunate involvement in the Silk Roads Hidden Website case.

U.S. Senators and policy makers have been asking for specific guidelines on the issue of handling cryptocurrencies since the summer, and the publication of initial responses favours ranking the virtual money on the same step with nationally-regulated currencies. The Securities and Exchange Commission has been considering whether bitcoin should be listed among securities, while the Department of Homeland Security advises an “aggressive posture” against the “emerging threat and criminal exploitation of virtual currency systems.” But that’s not all. Even greater steps have been taken by the Treasury’s Financial Crimes Enforcement Network in the creation of rules concerning the handling of virtual currencies by exchanges.

Yet, it’s not all blue skies and sunshine for the future of cryptocurrencies. Despite its creation of handling rules, the Treasury has rejected the definition of bitcoin as currency, while the Bitcoin Foundation itself finds the proposed regulations too strict in their demand of listing bitcoin exchanges as state by state wire services. The Internal Revenue Service, which has been investigating the tax-evasion potential in relation to virtual currencies, and the Commodity Futures Trading Commission, which has argued that handling bitcoin as a commodity rather than a currency might be more appropriate, have been noticeably silent in the conversation around the status of virtual currencies leading up to today’s meeting.

It is up to Washington now to determine a definition for bitcoin, and until official reports are out, investors are left wondering about both the nature and legitimacy of this new market asset.

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morning-coffee

Will Bitcoin Continue To Rise?

It’s hard to believe that the current price of bitcoin is now an astonishing $390. It seems like it’s the game we should have been playing these last few years - like Kristopher Koch did, the Norwegian student who bought 5,000 bitcoins for $27 in 2009 as part of his thesis. He forgot all about them and only found them last month. Now he’s rich: 5,000 times $390 is $1,950,000! Unfortunately, most of us missed the boat then! But is it too late now? Should we be buying bitcoin in the hope it will continue rising? People find it hard enough to value gold, but how do you value bitcoin? It has a limited supply in its favour (there are about 12 million so far, and an upper limit of 21 million). Couldn’t someone find a way of replicating them? Apparently not, but these days, you never know. Assuming bitcoin is here to stay, there are two bigger issues. The first is that bitcoin is meant to be a medium of exchange but they’re rising in value so fast, it’s tempting to spend your pounds or dollars instead! This is a form of Gresham’s Law at work; bad money driving out the good.

Clearly, this is one of the issues with being an independent currency in a world where central banks are hell-bent on devaluing their own paper. It cannot be entirely coincidental that bitcoin’s recent surge in value coincides with the European Central Bank cutting a key interest rate from 0.5% to 0.25%. If bitcoin is to become useful as a more mainstream medium of exchange, its value has to fall or stabilise at the very least. This goes against its astronomic rise continuing forever. Another concern is that that governments may come after it. They may not be able to crush the crypto-currency concept now that it’s out there but they may well be able to keep a hold on it with regulation. Surely there’s no way that governments are going to relinquish control over one of the key things that gives them their legitimacy and power – the monopoly over currency issuance?

So will bitcoin continue to rise? As it’s a ‘bit’ of an unknown at present, it’s probably best to play safe and maybe accumulate a few, but only with speculative funds you can afford to lose.

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