Economics

Bitcoin: Apparently Valued for Much More Than Buying Illegal Things Online

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As the private digital currency Bitcoin rose to prominence, it could not escape having its reputation tied in with the now-shuttered-by-the-Feds darkwebsite Silk Road, which scared many people because it allowed peaceful and satisfying transactions involving mostly things that some government said you couldn't do. (Substitutes for Silk Road already existed, and new ones have arisen since the takedown.)

So some thought that when Silk Road went down, Bitcoin would too. And it did, for little bit.

But the idea and practice of Bitcoin -- private currency free of the state -- seems to have more momentum than state currencies right now, if market prices are any indication.

The Guardian has the latest:

Bitcoin, the cryptographic peer-to-peer digital currency, has reached a new price high since the market crash in April this year.

Over the two weeks to 21 October, the value of one bitcoin rose by almost $60, and on Tuesday hit a high of $197.40 at the largest exchange, Mt Gox. An estimate of the current price taking a broader spectrum of exchanges into account shows it at $182.74.

The price of one bitcoin peaked at $266 on 10 April, before tumbling rapidly to a low of $50 shortly after. Since then, the price has not risen above $170 until this week.

Some observers worried that the shutdown of the online drugs marketplace Silk Road would hit the Bitcoin economy. A paper from 2012estimated that almost one bitcoin in 20 was spent on the site, andeconomist Jeffrey Cook of World's First currency brokers warned that investors were "scrabbling for the exit".

But others pointed out that the closure could provide a source of strength for the fledgling currency. "If anything, the fall of Silk Road has done Bitcoin a favour," said Emily Spaven, editor of the digital currency news website CoinDesk. "Hopefully now that the website no longer exists, people will start to see Bitcoin in a more positive light and appreciate the numerous benefits it offers."

That latter prediction seems to have stood up. The price drop caused by the closure of Silk Road was reversed in less than two weeks, and the value of a bitcoin has seen near-continuous growth since then.

Save your federal reserve notes, boys, the United States will rise again!

Reason on Bitcoin.

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  1. Until the Feds pull the plug and accuse it of being used for "money laundering" because it makes things harder to tax.

    1. They can make the exchanges very uncomfortable, but to really shut it down, you'd need to do internet control of a magnitude worse than China. And then the US loses out on all the actual economic growth happening because of it (simple, frictionless payments).

      They may try to shut it down, I don't think they can do much, though.

    2. makes things harder to tax.

      Fair sharez.

  2. OT: Washington State medical marijuana dispensaries freaked out by regulation:

    "I'm terrified ... that the recreational users have thrown us under the bus," said Darington, of Choice Wellness Center. "When they put a tax on the sale of Viagra is the day I am willing to sit at the table and discuss putting a tax on this medicine."

    ===

    Yeah, that stuff you call Medicine is that stuff that's now legal like beer and wine.

    Tax us, regulate us, set us free just fucked you again.

    http://seattletimes.com/html/l.....otxml.html

    1. Another question is whether the state might create a system that exempts patients from paying taxes, or at least requires them to pay lower taxes, at recreational-marijuana stores. Such a system might require a patient registry ? an idea that some medical-marijuana advocates have warmed up to, after opposing it for years on the grounds that it would violate patient privacy and force them to admit to violations of federal law.

      "Warmed up to"... because you're about to be put the fuck out of business? Nah, can't be that.

      1. Such a system might require a patient registry

        That will never be abused by the DEA.

  3. Some observers worried that the shutdown of the online drugs marketplace Silk Road would hit the Bitcoin economy. A paper from 2012estimated that almost one bitcoin in 20 was spent on the site, andeconomist Jeffrey Cook of World's First currency brokers warned that investors were "scrabbling for the exit".

    This is the stuff that I've been curious about.

    I'm glad someone is out there trying to figure out what percentage of bitcoin is used on what.

    1 in 20 doesn't seem too bad.

    1. Of course given the numerous other sites dedicated to the trafficking of drugz, that number is much higher for the category as a whole.

  4. Regarding the $80 million+ worth of BTC the Feds could not seize from Ulbricht:
    Silk Road case could set bitcoin legal precedent against self-incrimination

    And there you have it. The most interesting aspect of the Silk Road case may not be the demonstrated capability of a regulation-free commercial zone. Nor may it be the breakthrough in merchant anonymity with a ratings system powering a digital agorism.

    The most interesting aspect of the Silk Road case will most likely be the sweeping legal precedent set for compulsory key disclosure and the Fifth Amendment. If your online wealth cannot be robbed by common bandits or government officials, then the world truly has a digital money worth paying attention to.

    Compelling an individual to turn over passwords or private decryption keys affects more than just access to financial property and information. It extends into any digital property or private information that is under the custody of an individual where its revelation constitutes self-incrimination.

  5. If your online wealth cannot be robbed by common bandits or government officials, then the world truly has a digital money worth paying attention to.

    And when the government officials are the common bandits, then they can simply force you to disclose your key by throwing you in a dark hole for the rest of your life.

    I personally think this new era scares the shit out of our common bandits government officials and so my pessimistic bet is that the court will take a friendly view towards forced disclosure. Because economic stability and taxing authority trumps your individual rights.

  6. The problem with Bitcoin is that the use of money as a store of value and as a medium of exchange is combined in Bitcoin.

    1. Like the gold standard-era dollar?

      1. Yes. Just becuase it's better than what we have now doesn't mean it doesn't come with it's own set of problems.

    2. Could you elaborate on this? It sounds like what you're saying is that the store of value should be so inconvenient that it can't also be used as medium of exchange. That effectively describes gold, no? If so, why is that better?

  7. Here's hoping that the gubment isn't as idiotic about this emerging technology as the music and film industries were 10 years ago. I don't really care for 10 years of them shooting themselves in the foot before they finally realize that this is the future.

  8. Stop quoting the Mt.Gox price. It doesn't mean anything anymore, as it's not possible to withdraw dollars from there. (It hasn't been for several months.) Gox isn't even the top exchange anymore; Bitstamp is.

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