Bitcoin Shrugged

bitcoinBitcoin has been attacked from multiple angles over the past month.

China’s Central Bank essentially banned financial institutions and payment processing companies from handling Bitcoin. The directive said the step was needed to “protect the status of the renminbi as the statutory currency, prevent risks of money laundering and protect financial stability.”

Chinese authorities said that Bitcoin was “not a currency in the real meaning of the word” but was rather a “virtual commodity that does not share the same legal status of a currency. Nor can, or should, it be circulated or used in the marketplace as a currency.”

Russian authorities also announced that Bitcoin is illegal under current laws and that possession of Bitcoin is a crime. Russian Prosecutor General’s office said: “Bitcoin is a money substitute and cannot be used by citizens and legal entities.”

Similarly, Canada released a statement that said Bitcoin is not legal tender in the country. Of course, governments have no business telling free people what forms of currency they can use for voluntary commerce or speculation, regardless of the volatility. Linking Bitcoin to illegal drugs constantly in the media is disingenuous and hypocritical, considering most illegal money exchanges are done using U.S. dollars. Should we make the U.S. dollar or Canadian dollar illegal since some people use them to buy drugs?

U.S. legislators in New York announced scheme to begin issuing BitLicenses in order to get their slice of the pie. California has been more lenient but politicians are also meeting there to determine how to best regulate Bitcoin. They claim it is necessary in order to protect the public from themselves, but it seems rather obvious they are protecting their banking buddies and making sure they get a cut of the action. How dare people use a currency not issued and regulated by the government! Know thy master!

Federal prosecutors in New York recently indicted the head of a digital currency exchange on charges of conspiring to launder more than $1 million in Bitcoin tied to Silk Road, an online drug bazaar. Charlie Shrem, the chief executive officer of BitInstant, resigned as vice chairman of the Bitcoin Foundation following his arrest.

Silk Road 2.0, a black market for many things including illegal drugs purchased via untraceable Bitcoins, reported that 4,474 bitcoins valued at about $2.7 million, were stolen from the site.

If that wasn’t enough, three of the major exchanges halted withdrawals with Mt Gox citing a significant flaw in Bitcoin code. Coders say the fault lay with Mt Gox’s own software – not the Blockchain protocol. Coders were quick to point out that the issue has been known since 2011 and has already been patched by many reputable Bitcoin sites. BitStamp, Mt. Gox and BTC-e all halted trading temporarily. The flaw in the Bitcoin protocol enables an attacker to hide the transaction ID and repeatedly request a transfer of the pseudo-currency.

From all of the negative media coverage, you would assume that Bitcoin had crashed 50% or more.

Not exactly.

The weighted average price of Bitcoin today was $661 versus $549 exactly 3 months ago. That is a 20% gain, including the recent correction that has so many speculators sweating bullets.

Over the last 6 months,  Bitcoin is up 541%! Sure, it is down sharply from the all-time high above $1,110, but these types of pullbacks and consolidations are healthy in any bull market.

Those that have bought into the technology and philosophy behind Bitcoin aren’t bothered by these short-term price machinations. Despite being attacked by all sides over the past month, Bitcoin has done nothing but shrug with indifference. The price has been volatile, but has consistently bounced back from negative news.

This is the point that the government, media, power elite, bankers and Bitcoin bashers seem to be missing… Bitcoin and its core users could care less about their rules, dictates or threats. The system was designed specifically to work outside of the system and bypass the banking elite and corrupt politicians that are currently scrambling to find a way to control it.

So many gold investors have a deep hatred for Bitcoin that I believe is misplaced. Bitcoin is not the enemy of gold, nor as destructive, corrupting and exploitative as FED fiat money.

Fundamentals have been improving as adoption grows like wildflowers. The list includes Overstock.com, Subway, the Sacramento Kings, two downtown Las Vegas casinos, multiple Universities in Europe, at least one hedge fund and the list continues to grow.

With supply limited and demand growing strongly, the price forecast is not difficult. Governments will continue to attack Bitcoin in order to prop up their own illegitimate currencies, but I believe Bitcoin will keep bouncing back and shrugging off the attacks.

The technical chart remains bullish as Bitcoin is still above the December low. Decreased volatility seems inevitable as adoption grows and is indeed reflected in the chart over the past 6 months. U.S. government interference can and most likely will suppress the price advance, but the technology was created specifically to avoid regulation and it is yet unclear how effective governments will be.

bitcoin chart

We are witnessing tremendous resiliency from Bitcoin in the face of multiple attacks. Hackers are launching DDOS attacks and attempting to exploit vulnerabilities in the code.  Governments are moving to regulate the currency or ban it outright, while arresting leading proponents. The media is dramatizing the bad news, focusing primarily on the fact that it can be used for illegal activity. Even libertarians are hard money advocates are bashing Bitcoin, presumably because they failed to profit from the recent rise or blame Bitcoin for gold’s decline.

Despite all of this, Bitcoin is holding up quite well and a growing list of online and offline business are now accepting the digital crypto-currency as payment. The future of Bitcoin remains to be seen and there will undoubtedly be some growing pains along the way.  After all, we are in the Wild West as far as digital currencies go. However, Bitcoin has shown an incredibly ability to roll with the punches, bounce back from losses and ultimately shrug off  attacks from the old guard.

The achievers of society may now have another tool to enable the abandoning of a decaying world of moochers and looters. The banking elite, crony capitalists and the politicians they own have good reason to be fearful.

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5 Comments

  • Stuart February 16, 2014 at 5:35 am

    Well researched and written article.

  • bitcamo February 16, 2014 at 9:25 am

    Great article! Finally a post that is well researched and is exactly on point, the mainstream media could take some lessons from you.

  • mark blair February 16, 2014 at 11:23 am

    Yes, nice article. Has anyone chanced upon ‘Mintchip,’ the Canadian Government pretendie (centralised) crypto? Plenty of food for political thought there!

    Just one note on the article:

    ‘Of course, governments have no business telling free people what forms of currency they can use . . . ‘

    Well, ummm . . . yes they do; but don’t get me wrong. I am explaining a libertarian principle here. This goes back as far as Rosseau, and the notion of the ‘social contract.’
    States arrogate unto themselves the right to control currency, as it facilitates tax collection. This is not an issue of ‘free people.’ The modern secular states are authoritarian. Full stop.

    So . . . deny the validity of the state. If you are a statist, ya gotta bite the bullet, and accept that the state has the right to facilitate tax collection. If you want to be free people, ya gotta displace the state, and undertake to run your society yourselves.

    [This is ultra simplistic: you can choose a libertarian 'nightwatchman state.' But the logic here is sound.]

    The only reason, I suspect, that Every Government hasn’t simply banned cryptos is ’cause it wouldn’t work. (And you gotta love Central Banksters who say stuff like, ‘Oh gee! We really don’t understand the possibilities of this Bit-thingie.’)

    The middle ground is what is happening: states are gonna try to nail Bitcoin’s head to the floor, which may well spark a massive anti-statist backlash, especially as the GFC really gets ugly. Check out Mazacoin.

    Mark Blair
    Unicup, Western Australia

  • ᙇᓐ M. Edward Borasky (@znmeb) February 17, 2014 at 5:56 am

    “Of course, governments have no business telling free people what forms of currency they can use”

    I can’t speak for Russia, China or Canada, but I can point you to where the United States Constitution grants the power to coin money to the Congress, a branch of the government. So yes, the US government *does* have the authority to tell US citizens what forms of currency they can use!

    • Jason Hamlin February 22, 2014 at 3:24 am

      There is a difference between coining the money and forcing the use of said money via violence. Saying the Congress coins money is not the same as telling free people what type of money they can use in voluntary exchange with each other.

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