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Bitcoin Price 2014: A Year in Review

If the story of bitcoin in 2013 was its meteoric rise in price, which saw it hit a peak of over $1,100 in November, then the tale of bitcoin's price this year is one of plummeting from those heights.

The price of bitcoin opened the year at $770, according to the CoinDesk Price Index. By mid-December, it was trading in the mid-$300 range. This represents a drop of more than 50% from the start of the year.

However, it's worth noting that bitcoin is still trading comfortably above its price for much of last year. Indeed, it is changing hands for more than three times the amount it was trading at during the highs of April 2013, before its historic bull run.

Over the past 12 months, the price has been buffeted by a diverse array of factors, ranging from adoption by payments giant PayPal and technology goliath Microsoft to the massive sell-order from the 'BearWhale' and rumoured clampdowns by the Chinese authorities.

The interactive price chart below, based on the CoinDesk BPI, retraces the highs and lows of bitcoin's price as it struggles to find its feet after an incredible year.

News Date :
 30-Dec-2014
Bitcoin Continues March to Mainstream at St Petersburg Bowl Game

If BitPay's decision to promote bitcoin through a college football playoff seemed bizarre or peculiar at times, the event ultimately succeeded as spectacle, promoting the emerging technology's benefits to many hearing about it for the first time.

The Bitcoin St Petersburg Bowl packed in references to bitcoin amid the typical college football trappings, the cheerleaders, marching bands and garishly painted fans that assembled in Florida throughout the week. Bitcoin was visible at a Christmas Day 'Battle of the Bands' competition, a commemorative physical bitcoin was used during the official coin toss and BitPay executive chairman Tony Gallippi explained bitcoin on local sports radio.

Though advertising blanketed the host stadium at Tropicana Field both on field and on ESPN, evidence suggests the event may have had the greatest impact not on a more general audience, but on BitPay's target demographic – small merchants.

In contrast to the skeptical college football fans in attendance and a sometimes critical social media viewership, the more than 20 local merchants surveyed by CoinDesk throughout the day were receptive to bitcoin as a payment method.

Still, the event featured a dedicated bitcoin 'Fan Zone' aimed at consumers. Located just blocks from the stadium on bustling Central Avenue, it was here where bitcoin arguably had the most impact on this demographic as attendees were able to ask questions and engage the industry.

AirBitz CEO Paul Puey, who showcased his company's bitcoin wallet at the booth, perhaps best summed up the industry's optimism that the game and similar events will have a more lasting impact on consumers and the general public.

Puey said:

"This event is not going to be remembered for the people who played in it, this event is going to be remembered going down as the biggest event to expose bitcoin in 2014. I can tell my kids about the Bitcoin Bowl, that I was there, that I educated a handful of people."

Perhaps most notable, however, was the lack of bitcoin payments at the event itself, as bitcoin was not accepted at the venue's retail stores or concession stands as it is at other US sports venues in San Jose and Sacramento.

"We could not come to an agreement on bitcoin being in the stadium with the Tampa Bay Rays," BitPay spokesperson Ashley Wheeler said, referring to the baseball franchise that calls the venue home.

As for the game, the North Carolina State (NC State) Wolfpack defeated the University of Central Florida (UCF) Knights after an exciting late comeback by their opponent. The final score was 34 to 27.

Up close with bitcoin

BitPay, Bitcoin BowlThough packed with entertainment, education was also a key focus for BitPay.

At its collaborative Fan Zone, bitcoin companies like Airbitz and Trucoin and digital payment companies like NCR Silver interacted with interested consumers alongside the official event sponsor.

NCR Silver product manager Reggie Kimble, who cited the Bitcoin Bowl as one of the reasons the payments giant integrated bitcoin into its point-of-sale system, believes events like the Bitcoin St Petersburg Bowl are effective and needed.

"A lot of people are interested in bitcoin and really, the name Bitcoin Bowl has inspired a lot of curiosity from the general public which is sadly disillusioned and asking a lot of questions, so it's an opportunity to educate," Kimble told CoinDesk.

However, Kimble noted that, for now, such education is still in the early stages. "I can tell you the most frequently asked question is 'Tell me all about this bitcoin'," he added. "Consumers want to know about it."

Chris Brunner, president of bitcoin brokerage Trucoin, reported more success, speaking to "a few hundred" people at the booth over the course of the day where he showcased his company's new bitcoin ATM solution.

"It's been exciting for us to speak to people who are from a slightly different demographic," Brunner said. "As bitcoin becomes more mainstream, it's exciting for us to touch base with the world outside with the tech-sphere."

Elsewhere, mobile payments startup TabbedOut was in attendance.

BitPay, Airbitz, Bitcoin Bowl

Consumer awareness low

Outside the booth, however, attendees seemed less concerned with bitcoin.

A random sampling of both NC State and UCF fans by CoinDesk suggested that bitcoin awareness among the crowd was limited, even despite the presence of the BitPay and bitcoin logos throughout the stadium and surrounding shops.

Regardless of demographic, many fans of both NC State and UCF were unaware of bitcoin, had only heard about it in passing or believe bitcoin is a company. Most seemed generally receptive to the idea of digital money, while others suggested they would learn more about bitcoin after hearing its benefits.

Steve Patterson, author of the e-book What's the Big Deal about Bitcoin? was also in the crowd interacting with fans, and reported similar findings.

"I've spoken with a few people here and no one understands anything about [bitcoin]," he said, adding that he's had the opposite experience with local business owners.

Twitter tipping blitz

The educational efforts surrounding the game weren't limited to St Petersburg.

On Twitter, bitcoin enthusiasts such as author Andreas Antonopoulos; bitcoin investor Erik Voorhees and core developer Jeff Garzik engaged social media users with bitcoin tipping service ChangeTip, donating bitcoin to those interested in learning more about the technology.

There, the industry helped dispel common misconceptions about the technology, while engaging users who demonstrated a real interest in the digital currency and poking fun at bitcoin's more visible critics.

BitPay refines its pitch

The game also showcased new advertisements for BitPay, both of which took opposite approaches to appealing to merchants while stressing bitcoin's benefits as an online payment option.

The ads are the first by a bitcoin company to appear on ESPN, a major US sports network that reaches 100 million households in total.

One video took a decidedly humorous approach to highlighting the difference between bitcoin and credit cards, painting traditional online payment companies as a greedy mafia.

Watch the first commercial here:

 

Another was more serious with its tone, emphasizing the benefits for merchants. The approach suggests BitPay is still trying to refine its pitch to a wider audience, but that small merchants remain its core focus.

BitPay boasts a notable stable of billion-dollar clients including online retailers TigerDirect and Newegg, and most recently, Internet pioneer Microsoft, though neither ad catered to enterprise companies.

Watch the second video below:

 

 

 

News Date :
 29-Dec-2014
Why Bitcoin Apps and Bitcoin Speculators Need Each Other

Here’s one way of looking at the bitcoin market:

  • Miners mint new bitcoins
  • Speculators buy/sell them
  • The price of bitcoin is affected
  • Miners with a marginal cost lower than the price of bitcoin keep mining

Here’s a visual representation of that story:

 

But is this the complete picture?

After all, new bitcoins aren’t the only thing that miners create.

Their competition with one another to mine the next block (and receive the current reward of 25 freshly minted bitcoins for doing so) also produces, by design, a secure financial network: one which is open, decentralized, programmable, and very inexpensive to use. The beekeeper gets honey, and the rest of us get flowers.

So here’s the other half of the story which completes the picture:

  • Miners create a secure network
  • Because it is open and programmable, apps and services are built on this network, driving demand for bitcoin
  • The price of bitcoin is affected
  • Miners with a marginal cost lower than the price of bitcoin keep mining

Here’s how it looks together:

What can we learn from looking at the system as a whole?

  1. Without speculators, there would be no bitcoin.  They provide miners, applications, and other participants with liquidity.  If you have bought or sold bitcoin as a speculator, you have helped enable the emerging ecosystem of bitcoin apps.  While speculative bubbles will swell and pop from time to time (see: 2013-2014), this does not change the underlying value of the network or the possibilities for the protocol.
  2. Bitcoin-enabled apps and services are the main driver of underlying demand for bitcoin, and as a result, the main driver of the price of bitcoin, since the supply of bitcoin is fixed. But it will take time to see the effect.  It is much faster and easier to place a buy/sell order than it is to build a bitcoin-enabled service.  Still, 2014 saw the emergence of the first wave of these apps, enabled in large part by services like Chain, which significantly reduce the cycle time for building them. As these services grow, and more services come online, the price of bitcoin will steadily rise.
  3. But what about price volatility?  Whether volatility increases or decreases, one thing is likely to be true: it won’t matter as much going forward as people think.  Why is that? Because bitcoin apps will increasingly hedge their users’ exposure to price volatility, thanks again to the speculators, who want leveraged exposure to bitcoin.  In other words, the only people that will experience bitcoin volatility will be those who choose to.  This is no different than any other financial market comprised of hedgers and speculators, except for the important fact that it is likely even easier, cheaper, and more efficient to hedge using the block chain and smart contracts than it is in other markets.

tl;dr: Miner’s main output is a secure network, apps will be the main driver of bitcoin’s price, speculators are healthy, and volatility should not be feared.

 

 

News Date :
 22-Dec-2014
VIRGIN FOUNDER RICHARD BRANSON SAYS BITCOIN IS WORKING

VIRGIN FOUNDER RICHARD BRANSON SAYS BITCOIN IS WORKING

 

Sir Richard Branson, one of the wealthiest men in the United Kingdom (well, in the entire world) had an interview with Bloomberg News (view the video interview below). A remarkable one as the entrepreneur and founder of Virgin took a clear stance on Bitcoin and virtual currencies.

Bitcoin is working

Branson had shown his support for the idea behind Bitcoin before, but was put to the test again by the Bloomberg interviewer after making a statement concerning the upcoming Virgin Galactic spaceflights. As we all know, Virgin plans to be one of the first companies to offer commercial trips into outer space to its customers. A ‘mere’ USD 250,000 gets you a seat on one of their spaceships. Everything is still under development but people are already able to book their seat.

CCN

Of course, an event like this attracts the rich and famous, including the Winklevoss twins. When they heard Branson agreed on accepting Bitcoin as a payment method, they did not hesitate to make use of it. Not surprising at all, since the Winklevoss twins are known to be very bullish on Bitcoin.

Read: Richard Branson Supports Bitcoin, Accepts it for Space Travel

When asked why Branson is accepting Bitcoin as a payment for his Virgin Galactic program, he responded by saying this:

“Well I am not foolish. If lots of people have bitcoins and want to spend it on a ride into space, why should I not accept it?”

He also added that he is not the only one trying to get people into space.

“One day, Elon will be able to offer people rides into space as well. I’d rather have them in the Virgin Galactic program so we’ll grab the money while it’s there.”

Branson mentions Elon Musk, the co-creator of PayPalTesla Motors and SpaceX.

By using the phrase “we’ll grab the money while it’s there,” Branson does not seem to be very respectful to Bitcoin owners. It almost sounds like he only cares about the money flowing in, no matter where it comes from. While this is obviously true (Branson is a businessman, in the end it’s all about the money…), he still has a soft spot in his heart for every worthy invention in this world. When asked about Bitcoin and if he thinks it will ever work, he shows his real thoughts about it.

“Bitcoin is working! There will be other currencies like it that may be even better but in the meantime, there is a big industry around Bitcoin. Some people made a fortune out of the currency; others lost a lot of money with it, but it is working right now.”

An interview about Bitcoin wouldn’t be a real interview without mentioning its volatility of course. Branson did not seem too concerned about that.

“Yes, it is volatile but volatility is a state that enables people to make money from the currency.”

Having a public figure like Branson telling the world that Bitcoin is working, is great for the cryptocurrency. People like him are well respected, and their words carry a certain value with them. The world believes that they know what they are talking about. History has also shown that Branson knows which projects to endorse and where to steer clear from. Embracing Bitcoin can only make people more interested in what this virtual currency is all about.

So to everyone interested in venturing into outer space, now is your chance! Have your bitcoins (a lot of them) ready and book yourself a seat on one of Virgin Galactic’s upcoming flights. According to Branson, the spacecrafts are almost ready, and the program should be starting somewhere early next year. To infinity… and beyond, with Bitcoin!

 
News Date :
 17-Sep-2014
Bitcoin Moves From $339 To $680 In Two Months: Could It Go Above $1,200?

 

 

Bitcoin hit a low of $339 just two months ago and went on to hit a high of $680 on June 3, accordingto leading exchange Bitstamp. The question now on everyone’s mind is: is bitcoin headed higher?

2013 Price Explosion and 2014 Optimism

In 2013, Bitcoin rocketed from $13 to above $1,160 in late November before ending the year at $739. At the end of the year, optimism was high. Bulls were predicting bitcoin would end 2014 in the $5,000 to $10,000 range. Overstock’s January announcement, that they were accepting bitcoin, added additional fuel to the positive sentiment.

Related: Top 8 Bitcoin Stories of 2014

2014 Negative News

2014 has had a lot of negative bitcoin news as well; the scope of failure at leading exchange Mt. Gox was shocking even to the most faithful bitcoin advocates. The arrest of bitcoin industry board member, Charlie Shrem, the negatively perceived IRS ruling and China’s tightened bitcoin regulations all brought bitcoin’s price far lower than believers thought it could go.

2014 Fundamental Improvements

While most people have been fixated by the negative headlines, savvy investors and the bitcoin faithful have viewed these lows as a temporary discount. At a fundamental level, bitcoin has had a massive leap of utility in 2014. Here are some of the reasons:

  • Venture capitalists have poured hundreds of millions of dollars into bitcoin this year.
  • Circle launched to make bitcoin as easy for consumers to use as a bank.
  • Bitreserve is launching to eliminate bitcoin’s volatility for customers.
  • So many companies accept bitcoin it is no longer news, unless they are a multi-billion dollar company.
  • Innovations in consumer safety are in the works on a level never seen before. Soon viruses won’t be able to steal bitcoins
  • Silicon Valley startups like Stripe and Square and regional startups like Tech Twurl are incorporating bitcoin into their offerings.

How High Could Bitcoin Go?

Believers think bitcoin will be bigger than the internet. Venture capitalist Chris Dixon has gone on record stating a bitcoin could be worth 0,000. Bitcoin could easily hit a new all-time high this year -- if the SEC greenlights a bitcoin Exchange Traded Fund in the works.

The only certainty about bitcoin’s price is it will continue to violently thrash about throughout the year, as investors react to developments. For retail investors, bitcoin is either the opportunity or the folly of a lifetime.

Disclosure: At the time of this writing David Smith has a long bitcoin position.

News Date :
 06-Jun-2014
Beijing Summit: What if They Had a Bitcoin Ban and No One Cared?
 

 

If the recent issues surrounding bank account closures and domestic media warnings were supposed to scare Chinese attendees away from the two-day Global Bitcoin Summit starting in Beijing Saturday, someone forgot to tell everyone.

The main 400-seat auditorium was regularly full on the first day for the event’s keynote speakers, which included Roger Ver, Aaron Koenig of the Global Bitcoin Alliance, and Wang Wei of the Chinese Museum of Finance.

The overall tone was not so much defiance, but apathy towards greater regulation.

Summit_guide Beijing

While Bobby Lee of BTC China was noticeably absent from the day’s lineup, attendees remained focused on the future and dedicated to the cause. Both the size and mood of the crowd confirmed what several of CoinDesk’s local Chinese sources have been saying for a while: The community at large is tired of hearing about banks vs. exchanges, and wants to keep building.

How exactly they plan to do this without fiat gateways will be a discussion point tomorrow and in the coming months.

China is big, in every sense

The huge China National Convention Center, located just across the road from Beijing’s 2008 Olympic main stadium, also highlighted just how niche bitcoin still remains in the overall Chinese economy, which is still booming.

The bitcoin summit itself took up a relatively small space at the back of the second floor. Attendees passed massive franchising and marketing conventions, each with their own collection of booths and babes, before even seeing a bitcoin logo.

Regulation not an issue

Regulatory issues were barely touched upon, if mentioned at all, during Roger Ver’s keynote. Stressing once again the utterly voluntary nature of the bitcoin economy, he told the audience his mission was now more that of a promoter of bitcoin’s cause around the world.

“I’m pretty much done investing in bitcoin startups. But if you know some good ones I’m always very happy to introduce you to the right people,” he said, when asked if he intended to invest further in Chinese companies.

Roger Ver speaks in Beijing
Roger Ver speaks in Beijing

On the topic of which companies he predicted would succeed in future, Ver said “it’s still too early to tell,” comparing the landscape to search engines in the late 1990s, when it was still unclear whether Lycos, Yahoo or Altavista would dominate in future years. He continued:

“But somebody’s going to work it out. Somebody’s going to do it right.”

Chinese companies were continuing to do well, he added:

“I’m often more impressed with Chinese bitcoin exchanges than I am with some of the US and European exchanges.”

Harry Zhou, an Associate with White & Case LLP, gave another presentation on regulation specific issues, but chose to speak generally instead of referring to current events directly.

Comparing the legal situation in China to that in the US, he drew key differences between each country’s definition of ‘legal tender’, as well as the US’s federal system and competing state jurisdictions.

In China, he said, the renminbi is the only legal tender and that is sacrosanct; even precious metals are not allowed. In the US, however, alternative local barter systems and gold and silver were tolerated even though the US dollar remained the only official legal tender.

Other features

Other international guests on the day’s speaking agenda were Ethereum’s Vitalik Buterin and Anthony di Iorio from the Bitcoin Alliance of Canada.

Ethereum's Vitalik Buterin & Ethan Wilding in Beijing
Ethereum’s Vitalik Buterin & Ethan Wilding in Beijing

While booths marked with exchange names (like CHBTC) were empty, other local startups filled the spaces. We saw secure wallet Bifubao, mining equipment makerGridseed Technology Ltd., and even a couple of OKCoin branded ATMs. Representing the alt universe was Zetacoin, promoting its Swiss-built payment infrastructure designed for countries like Kenya.

OKCoin_ATMs

Beijing’s Global Bitcoin Summit continues Sunday.

 

By Coindesk.com

News Date :
 12-May-2014
Bitcoin has bright future

Despite warnings against the bitcoin virtual currency from financial regulators worldwide including the Bank of Thailand, some entrepreneurs, investors and users are prepared to take risks and jump on... 

 

Despite warnings against the bitcoin virtual currency from financial regulators worldwide including the Bank of Thailand, some entrepreneurs, investors and users are prepared to take risks and jump on this new money-spinning bandwagon. 

Central banks still remain wary of bitcoin, mainly because they cannot regulate it.

Steve Beauregard, chief executive of GoCoin Pte, a Singapore-based international payment enabling merchants to accept bitcoin and litecoin payments, said at the Asian Financial Service Congress 2014 the adoption of digital currency is gaining ground and it is the future of money in the global economy because existing currency systems have led to financial uncertainties such as US dollar volatility and hyperinflation.

Moreover, existing conventional online payment systems charge higher transaction fees compared with digital currencies including bitcoin.

Some 12 million bitcoins are believed to be in circulation, and every 10 minutes it can generate 25 bitcoins. The system is designed to generate under 21 million bitcoins, which explains why their value continues to increase.

The adoption of bitcoins would enable merchants to increase their business opportunities and reduce financial transaction fees from the current banking system.

For instance, the website tigerdaily.com received US$500,000 worth of orders in its first week after receiving bitcoins. Another online merchant, Millennus, which uses bitcoins in 5% of all orders, has not experienced any fraudulent trade, compared with 2.7% fraudulent trade conducted via existing online payment systems.

Mr Beauregard suggests the Bank of Thailand and other policymakers embrace this technological phenomenon through issuing licences for those involved with bitcoin as financial service providers.

Regulators can govern these service providers via existing policy mandates, particularly Anti-Money Laundering and Know Your Customer policies, which have become increasingly important on a global scale in order to prevent identity theft, financial fraud, money laundering and terrorist financing.

David Barnes, managing director of Bitcoin Co, a local virtual currency exchange in Bangkok, said the bitcoin market in Thailand remains miniscule, but there has been a slight increase in local people asking about using bitcoins to purchase computer games or web-hosting services, instead of using the virtual currency purely as a form of investment.

"Bitcoin has huge potential to revolutionise the financial industry and I think everyone should have a small portion of their portfolio held in bitcoins," said Mr Barnes.

But he admitted bitcoin is still exposed to a very high-risk investment grade and users should only invest money in bitcoin that they can afford to lose.

"The fact that bitcoin has frustrated regulatory policymakers is not important. Horse sellers were pretty unhappy about cars," said Daniel Garniron, a freelance stock trader who bought bitcoins back when their value was $20 for a single virtual coin and kept them until they reached $100.

This kind of technology actually makes things simpler, cheaper and more effective than the current banking system.

Using bitcoin is not as complicated as one might think. It can be rather easy and convenient, enabling users to make financial transactions in one minute compared to the traditional banking system that can take weeks plus hours of paperwork, not to mention huge transfer fees depending on the regulatory environment.

Despite its high volatility, the bitcoin is one of the less risky reserves of value that users can hold because its future adoption is obvious. Gold is highly manipulated as the Comex is working with fractional reserves, meaning there will be a crash if there is a bank run.

As a stock trader, Mr Garniron said he invests what he can afford to lose in bitcoin not only because it is safer, but also because people often make mistakes when they let their emotions affect their investment decisions.

Since virtual money is very difficult for authorities to control, its influence remains very small. "Policymakers should not try to fight against it, but embrace this innovative technology because bitcoin will bring prosperity to every country that is open enough to accept it, as it facilitates business and trade," said Mr Garniron.

Don Sambandaraksa, a technology writer who started mining bitcoins more as a hobby than to gain from an investment, said the idea of creating a virtual currency as a completely decentralised, peer-to-peer crypto-currency is gaining momentum among the technology community.

Before the financial crisis in Cyprus, a single bitcoin was worth around $40. In response to the collapse of Cypriot banks, the government had to impose stringent capital control measures on money being transferred out of Cyprus. Limits on ATM withdrawals were put in place and deposits above 100,000 euros were frozen.

Within a couple of weeks, the price of bitcoin doubled and this underlined its value in providing currency freedom in a world that is far from achieving a fully liberated status, said Mr Don.

The situation in Cyprus proved that even within a single-currency area, governments can still seize your bank deposits if they need to and impose restrictions on how that money can be transferred.

"This case inspired me. It has been a game of keeping up with new technology, new coins, new mining equipment and watching out for any financial crisis," he said. "Every time there's a financial crisis somewhere, whenever a central bank is running out of money, the price of bitcoin always shoots up or goes down."

He also acknowledges the bitcoin is much more volatile and risky currency. People normally complain if stocks go down 2% in a day, but a daily 20% fluctuation is common in the bitcoin world.

For other alternative new digital currency coins, users can easily double or halve their investments in a few days. This comes as a huge risk but is also an opportunity.

Mr Don said financial regulators would not embrace bitcoin as it is a threat to banks and credit card companies since bitcoin payments are almost free, borderless, instant and irreversible.

Bitcoin makes currency control impossible due to its decentralised, cryptographic mechanisms and this is precisely why all central banks, especially the Bank of Thailand, struggle so much as the baht currency is not freely convertible.

Other experiments with new coins such as Protoshares and Memory Coin have shown that it is possible for a coin to replace conventional means of trading in a stock market. This means that a centralised stock exchange is not needed as accounting and dividend disbursement is taken care of by the decentralised coin network itself.

He said bitcoin will change the world for the better and redistribute power away from bankers and toward the people. It is democracy in action as any change needs to be agreed on by more than 50% of its miners for the change to be accepted into the system.

"Bitcoin is the ultimate realisation of the self-sufficient economic principle. Its deflationary model — based on gold — means that saving is rewarded again whereas interest savings do not even cover inflation," said Mr Don.

A society using bitcoin would not be able to keep printing money and further increasing sovereign debt, and it would have to balance its accounting books, he added. This would make populist debt-fuelled political promises impossible.

Even the practice of war could only be justified if every citizen decides to fund it in advance, rather than through the traditional route of central government debt, said Mr Don.

 
News Date :
 12-May-2014
Why Bitcoin crashed and will rise again

Bitcoin brings money to everyone in the worldOnce again the Bitcoin world is full of panic. Shit (mostly Chinese) has hit the fan and prices are falling down as we speak. Five months ago, Bitcoin was at an all-time high. One coin was worth more than a thousand dollars. At the moment I’m writing this; a Bitcoin is valued at a ‘mere’ 400 dollars. How did we get to this point and are people right to panic?

No crash is ever the same

I often hear cryptocurrency fanatics say this has happened before. They refer to crashes that happened one or more years ago and the climb Bitcoin made after that. Are they lying? No, of course not, they are talking about facts. But I wonder how you can compare Bitcoin’s recent developments to things that happened in the past. Circumstances have changed, and the reasons for Bitcoin’s decrease in value are different now. That does not mean Bitcoin is dead though, not by a long shot.

So what are the reasons for Bitcoin’s recent drop in value? Well, that is a question with multiple answers. Some are positive if you practice long-term thinking. Others are negative and related to severe growing pains. I believe there are three big influences right now.

1. Humane error

Ths is a very important one, in fact, I think it is easily the biggest influencing factor. For as long as we have roamed this planet, we have been known to make mistakes. Some are intended, made by bad people to increase their own gains. Others are not intended, made by people who only want the best for this world but failed to deliver in the process.

I am convinced most errors related to Bitcoin were not made by bad people. Most, not all. If anexchange like Mt. Gox collapses, much money is lost to many people. We hold a single person responsible while there was an entire team behind this exchange and its failure. Nevertheless,Karpeles is our scapegoat. I will probably hit a sensitive note here, but I do not think Mark Karpeles is a horrible person. I refuse to believe he wanted to steal millions of dollars, leaving all of his loyal customers in the cold. Instead, I think this was caused by bad management. Karpeles is no CEO. His qualities are different from that. And that is one of Bitcoin’s severe growing pains.

Multiple startups have appeared ever since Bitcoin started gaining momentum. Some were led by competent people. Coinbase or Bitpay are great examples of how a Bitcoin enterprise can work. And even they make mistakes sometimes.

The truth however is, unfortunately, that many of these startups were founded by people that lacked business experience. With Bitcoin’s rapid growth, these companies expanded very quickly. Too much growth at once never happens without sacrifice. Hacked exchanges often (not always) happen because their board underestimated the risks. Just a little while ago, we saw the first independent audits of only a few of these websites. When you are dealing with people’s money, audits like these should be standard. Especially when you claim to be part of a movement that wants to improve our traditional banking system. We should learn from previous mistakes, not repeat them.

The bad news that comes forth of mistakes made in the Bitcoin world is eagerly picked up by authorities and mainstream media. Which brings me to my next point.

2. The powers that be do not like Bitcoin, even when they say they do

Make no mistake, Bitcoin is an attack targeted at the system. Certain governments may tell you they think Bitcoin is an interesting technology, that does not mean they like it. In fact, I’m sure there is not a single government out there that wants to embrace Bitcoin as the future of money. They just take different approaches.

The US seems divided on this. They see a disruptive technology which they fear; but at the same time, they notice the scent of money that they love. An outright ban could destroy Bitcoin; they won’t do that as long as they believe profits can be made. The IRS ruling that Bitcoin is a propertyinstead of a currency was made to sustain Bitcoin. “We’re not banning anything, we’re just making it less interesting for you.” That was their basic thinking behind that move. Of course, it wasn’t well thought-out. One of their biggest ‘Bitcoin criminals’ made headlines when he managed to use that ruling in his favor. On top of that, the paperwork brought by this measure is supposed to be enormous, close to impossible to process.

Still, people made huge gains by trading Bitcoins over the past year. To think there would not be any form of taxation on this, would be downright naive. The IRS will keep taxing Bitcoin. If ‘property’ turns out to be too difficult, they will change it to something more fitting.

China, that other major Bitcoin player, likes to turn the entire cryptocurrency world into a soap opera. In the past weeks, Bitcoin has been banned about four times. The price plunged down every time some Chinese journalist claims he read a letter from the People’s Bank of China. No official letter has yet been seen. Truth be told, the Chinese exchanges announced they would stop accepting Yuan deposits, which is probably proof enough to believe the rumours.

Thinking a nation like China would accept a technology as Bitcoin is, again,  downright naive. Bitcoin stands for freedom; China does not…

Adding the numerous other governments that keep warning people for the dangers of the criminal Bitcoin world, it is very clear that the anti-Bitcoin movement is working around the clock to keep the FUD spread. And that will have a negative impact on Bitcoin’s value.

Amidst all these bad signs, there is a ray of light shining on our beloved virtual currency.

3. Increasing merchant-adoption rate

I read a very interesting post by Vinny Lingham, CEO of Gyft. He links Bitcoin’s falling to the increasing merchants that accept Bitcoin as a method of payment. That seems odd when you hear it at first, but when you think about it, it starts to sound reasonable. These merchants receive Bitcoins for their services. Obviously, they will sell a certain amount of these coins. Lingham explains it as follows:

“Although many Bitcoiners are hoping for more large retailers like TigerDirect and Overstock to adopt Bitcoin, it may have a negative impact on the BTC price as these retailers will most likely convert 90% of their coins to cash — putting additional selling pressure on Bitcoin. This outcome may not be as desirable in the short term, but it will create a better long-term outlook for Bitcoin given the liquidity options. Again, if you asymmetrically add large retailers without driving consumer adoption at the same time, the demand supply curve will shift undesirably.”

Makes sense right? I do not believe this is a bad thing, however. As Lingham says, it’s worth it in the long-term. For now, however, this- will- have an impact on the markets.

We will succeed

So, after listing all these reasons, why do I still believe we will end up in the right place? First of all, I believe in the Bitcoin protocol. We create so many chances for less fortunate people in the world who have no access to our financial system. The idea behind Bitcoin is a really good one. On top of that, the Blockchain provides us with more security than our paper-money system could ever do. People do not believe it yet, so we have to explain to them why that is.

If I want to do something illegal, I will choose to do it with cash. I pay up and leave. If no photographs or anything of that kind are taken, it will be close to impossible to trace me. The Blockchain, however, records every Bitcoin transaction ever made. Yes, transactions are anonymous but in the end, everything can be proven. That is an asset no official instance can ever provide. Not the way the system works right now.

I also believe that adoption is growing. Amidst all the FUD being spread and governments doing their very best to warn people for the big Bitcoin monster, more and more merchants are starting to accept virtual currencies. New enterprises are popping up every day, and their founders are more experienced. They learn from the mistakes they saw. And this does not only apply to new startups.  Exchanges are increasing security measures and performing audits. That’s the way they should be working.

We are picking up the pieces right now. Bitcoin is at a turning-point. Compare it to somebody who is on its way to maturity. We’re not there yet, and there is lots of work to be done, but we’re well on our way. We will overcome this; we will end up stronger, and we will reach that place where we all want Bitcoin to be. Falling down a few times just gives us more tools to face the future. So keep calm and never give up on your ideals!

Bitcoin world picture by dreamstime.com
Front picture by Forbes.com

Despite all the bad news, we have to keep believing in Bitcoin. This is our chance to give the entire world access to a honest financial system.

News Date :
 11-May-2014
Is Bitcoin Cloud mining Legal

FinCEN: Digital Currency Cloud Mining, Escrow Services Aren’t Money Transmitters

 

The US Financial Crimes Enforcement Network (FinCEN) has issued new rulings indicating that digital currency-related cloud mining and escrow services should not be considered money transmitters.

The two releases came via what appear to be responses to requests from businesses seeking to better understand FinCEN’s policies.

FinCEN, the bureau of the US treasury that collects and analyzes financial transactions, has previously released influential decisions regarding how consumer bitcoin miners and bitcoin investors should be regulated under money transmission laws.

Published letter rulings often express an opinion about a new issue, according to the agency’s website.

Escrow

Escrow in digital currency transactions is used to ensure parties are able to pay each other while remaining relatively unknown.

Read one letter that FinCEN released today:

“The [escrow company] needs to take possession of the funds and hold them in escrow until the pre-established conditions for the funds to be paid to the seller or returned to the buyer are met, then release those funds appropriately.”

The letter also presented background information on more traditional escrow-related businesses that FinCEN has ruled should not be treated as money transmitters.

This included instances of escrow companies that have, “accepted any consumer and any merchant willing to use its confidential process, and played no active part in arranging, monitoring, verifying or endorsing the transactions that it processed”.

FinCEN reasoned in the letter that this process, while part of a transactional as a whole, is not in itself a money transmission-type of service:

“The acceptance and transmission of funds do not constitute a separate and discrete service provided in addition to the underlying service of transaction management.”

Cloud mining

Cloud mining is when a customer ‘rents’ digital currency mining hardware from a provider. Customers then pay the provider on a monthly or yearly contract and profit from a subsequent portion of a confirmed blocks.

The second FinCEN letter states that this type of business does not fall under the auspices of Bank Secrecy Act (BSA) regulations:

“Renting of mining computer systems to third parties does not make the Company a money transmitter under BSA regulations.”

The letter notes that FinCEN’s view is that as property, digital currency that is mined under this system does not change hands:

“All virtual currency mined by the third party remains the third party’s property, and the Company has no access to the third party wallet, nor receives or pays virtual currency on the third party’s behalf.”

It seems that the computer systems component is central to this decision. “The rental of computer systems to third parties is not an activity covered by FinCEN regulations,” the letter adds.

 

Provided by Coindesk

News Date :
 09-May-2014