Posted on 11/02/2015 8:45:53 PM PST by Another Post-American
It was precisely two months ago, on September 2nd, when we explained that as a result of China's recent currency devaluation, in order to mitigate the inevitable capital outflows that such an FX move would unleash, China was "scrambling to enforce capital controls" in order to prevent the exit of hot (and not so hot) money from China's economy.
We then said the following to explain why "this is great news for bitcoin":
Which is why we would not be surprised to see another push higher in the value of bitcoin: it was earlier this summer when the digital currency, which can bypass capital controls and national borders with the click of a button, surged on Grexit concerns and fears a Drachma return would crush the savings of an entire nation. Since then, BTC has dropped (in no small part as a result of the previously documented "forking" with Bitcoin XT), however if a few hundred million Chinese decide that the time has come to use bitcoin as the capital controls bypassing currency of choice, and decide to invest even a tiny fraction of the $22 trillion in Chinese deposits in bitcoin (whose total market cap at last check was just over $3 billion), sit back and watch as we witness the second coming of the bitcoin bubble, one which could make the previous all time highs in the digital currency, seems like a low print. At the time of this forecast, the price of bitcoin was highlighted with the red arrow.
And while we were confident it was indeed Chinese capital "mobility" using the bitcoin channel that was the impetus behind the nearly 60% surge in the price of the digital currency in past two months to fresh 2015 highs, moments ago we got the closest thing to a confirmation when Bitcoin Magazine reported that "China is leading the charge, with the price trading anywhere from $10-$15 above the rates on U.S. and European exchanges."
Bitcoin Magazine further adds that "China is experiencing unprecedented amounts of growth. On October 30th, Jack C. Liu, the Head of International at OKCoin, said, in a tweet, that it had been the “busiest day of the year @OKCoinBTC as #Bitcoin trades to 2015 high of $344. No clawbacks on futures, no downtime. Great day for us & industry.â€"
Two days later, he went on to reveal that OkCoin had seen incredible demand for accounts on the exchange:
And here is the validation that, just as predicted here two months ago, bitcoin has become the go-to asset class for millions of Chinese savers seeking to quietly and under the radar transfer funds from point A to point B, whatever that may be, in the process circumventing the recently expanded governmental capital controls:
While he didn’t provide any concrete numbers, he did comment last week on what was driving the adoption. “Some Chinese traders are expressing a view on the CNY exchange rate after the last devaluation and you have interest by mainland speculators to move to other assets after the stock market fallout,†he explained in an interview with Bitcoin Magazine. Which again brings us back to our conclusion from two months ago:
... if a few hundred million Chinese decide that the time has come to use bitcoin as the capital controls bypassing currency of choice, and decide to invest even a tiny fraction of the $22 trillion in Chinese deposits in bitcoin (whose total market cap at last check was just over $3 billion), sit back and watch as we witness the second coming of the bitcoin bubble, one which could make the previous all time highs in the digital currency, seems like a low print. As of this moment, the total value of bitcoin is up from the $3 billion two months ago to a little over $5 billion. That means the ratio of Chinese deposits (at around $22 trillion) to bitcoin, is down to a far more "conservative" 4,400x.
And now, again, imagine what could happen if these same Chinese depositors realize they have been lied about the non-performing loans "backing" their deposits and that instead of the official 1.5% bad debt ratio, the real number is really far greater, somewhere in the 20% ballpark as we will show shortly, suggesting major deposit impairments are no longer the stuff of Cypriot nightmares but just the thing hundreds of millions of Chinese depositors have to look forward to, and that they have just two possible choices to avoid said impairment: reallocating their savings into bitcoin or, of course, gold.
To the latter point, someone posted a photo on Reddit of a magazine stand, showing front-page covers of the current issues of The Economist, Bloomberg Markets and Modern Trader (IIRC), all featuring bitcoin on their cover.
Bitcoin is up over 13% today, so something has certainly lit the afterburners on it. When I started my ping-list here just a few days ago it was at $280, and had risen from around $230 in just a few weeks. But my interest in bitcoin is long-term and I didn't want to be seen as hyping the price so I've mostly ignored it apart from a few asides. Now I feel like I almost did people a disservice.
That said, I would caution that people should research bitcoin and how to safely and securely manage it before they rush to get involved with it. Handled properly it's one of the most secure forms of money in existence - but if you do it wrong (and a lot of people do), you leave yourself vulnerable to hacks, scams, or just plain losing your own keys or bitcoin wallet. In which case there is no 1-800 number you can call to save you from yourself.
Ping!
I just don’t understand bitcoin, it is mostly I imagine a way for people using TOR to purchase drugs, yet TOR seems to have security flaws that as far as I can tell the feds could crack down on the drug purchases if they wanted to. Perhaps the feds just turn a blind eye to the drug purchases (bigger terrorist to fry). There is some gun purchases claimed by liberal news sites on the TOR network, but I have seen little proof of it. Who uses it and for legit reasons?
Apparently my copy & paste didn’t port over some of the quotes or the charts, so I apologize. Please visit the link to read the article in its entirety.
Memory of the mt gox fraud is fading?
“Who uses it and for legit reasons?”
Well, read the article for starters ;-)
I use it, and I’m as straight-up a clean-living conservative as you could imagine. Indeed, I struggle to understand the skepticism towards bitcoin by other conservatives and the way they cling to state-controlled money like a liberal on welfare grasping their entitlements.
People who never read past the headlines may just connect bitcoin with Silk Road and imagine that’s all there is to it. But as with most things, you won’t get an accurate picture of the subject only by reading a few headlines. The fact that bitcoin is free of government control and manipulation (printing fiat to balloon the money supply to prop up government welfare spending and dilute your savings), alone, is a huge reason to support it, and only one of many.
Somehow, I’ve survived well in life without bitcoin and since I don’t have a clue how it works, how it is not scammed, and why I would ever need it, I will continue to live without it.
I have bought some tea from a local merchant with BTC, and then there is Overstock.com. There are a few “merchant lists” out there: http://bitcoincoop.org/merchants
Thanks for the link, 14 whole places in my state, not exactly a lot of legit sellers, but at least there is some. Thanks.
I didn't see any what I call legit reason to use it. It was about moving funds around without the government knowing about it basically. I understand the Non-of-the-government's dang business mentality. I just do see a use I would consider it useful for.
So any monetary scheme has the inherent capability of whomever controls it to steal from it? Gee, that sounds like the “Federal” reserve—not federal and only reserve to selected individuals and entities. Who knew, and nothing is new.Nothing will change as human nature will never change.
That and the fact that BTC is still fiat.
So I guess you don’t use any cash either, due to financial scandals involving dollars from years ago. Try again.
Here’s an example: When I had a contractor dig my pond out a year ago, it cost $18,000. He had reasons for needing the money quickly to pay other bills and I wanted to oblige him for doing a good job, so I paid extra fees trying to move my money quickly and get funds cashed out and then sent to him. Even so it cost over $120 in fees and it was 11 days (!) before the check was in his hands.
If I could have convinced him to use bitcoin, I could have paid him instantly and for a transaction fee of less than 3 pennies. That’s how ludicrous the discrepancy is between fiat and bitcoin. Us bitcoiners have sore foreheads from all the facepalming we do listening to people say they see no point in using bitcoin. Just watch all the people walking into Western Union to pay huge fees (up to 10%) to move a bit of money around. Or the merchants paying 2.9% on every credit card transaction they accept, or dealing with forged checks or counterfeit cash.
The feds have gone after darknet servers and large drug dealers. They claim they find them through misconfigured servers, not holes in the Tor network.
The main point of bitcoin and tor is to use it for non-legit reasons. Mainly to avoid capital controls/taxes around the world. I’ve heard there are more cash sniffing dogs than drug dogs these days.
As far as buying “things”, for now the biggest class of banned items that is in demand is drugs.
Someday it may be things like primers, gun parts, books/ebooks, radios and other electronics. The whole point is to buy anything you want. The government definition of “legit” be damned
Crypto is not fiat in the relevant sense of being controlled by a central bank or other authority, that can print more money and dilute your holdings at will (and historically does so with regularity).
Guys, I don’t want to come across as a cheerleader for bitcoin. It was actually my hope to share some of my concerns and cautions with using bitcoin along with reasons to do so. I just find all my time here spent dealing with the inaccurate and erroneous attacks on bitcoin that I can hardly get to the intelligent reasons to be cautious about it.
Maybe I’ll find time to craft an essay of my own on how to be an intelligent and informed skeptic of bitcoin soon. Because you guys need help with that. ;-)
But you are a bitcoin cheerleader, as your “if only my poolman would take bitcoin” post demonstrates.
Bitcoin is like using Caitlin Jenner photos as currency. It only has value to the deviants who think it has value. Keep convincing people it has value and - like Enron - you’ll do well. Also - like Enron - you’ll eventually go down hard when everyone realizes it is vapor.
Oh, and, let me save you the trouble - blah, blah, blah... the dollar is vapor too... blah. Yeah, we know. At least it is backed by the force of law and the government can force others to accept my dollars to resolve debt. I’d much rather go back to a gold standard, but - lacking that - I’m certainly not going to go in the wrong direction to the bit-vapor standard.
I minted bunches of BTC a while back when it could be done with a good rig. When they got popular I unloaded most of them to good effect, some I squandered at Satoshi Dice and BitLotto. They were always bought by people who understood what was involved. Then they tanked; Mt Gox and all that.
It's the inability to use them conveniently and their volatility that dooms them IMO. The great value of BTC ritgh now is their ability to circumvent currency controls, which more and more financial authorities will be using in the future.
I will relate to you a long term experiment I have been conducting since 1997. When dealing with a non-corporate entity I offer to pay in cash and near-cash equivalents for a discount. Gold, silver and BTC literally get a blank stare; cash gets a smile and a handshake almost every time. Discounts range from 10% to 50% ( one time deal from a contractor in San Francisco). So right now, cash (Federal Reserve Units) is still king and will remain so until the morning when we wake up and it isn't any more.
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