Tracker Series

Bitcoin Bubble Tracker: December 13

Link to live trading on the various Bitcoin markets

Bitcoin Bubble Tracker | Week 2

Last week’s Bitcoin bubble literally burst on the news that China ixnayed Bitcoin as a legitimate currency. Little known fact is that more than 60% of the activity was centered in one area of China and the government just didn’t feel like competing with an anonymous, untraceable rouge form of exchange. That sent Bitcoin’s value plummeting by 50%  – it has recovered since then and is now in the $900 range.

So, check out what’s in store this week. [Hint – the bubble builders and busters sort of cancelled each other out …]

Hope you enjoy, and if you have any news you’d like to share, please send it our way at contactus@payments.com.

Bubble Builders

What do the gold rush of 1849 and the bitcoin bubble of 2013 have in common? Well, they were both born out of the idea that speculators could get fantastically wealthy overnight, both depend on miners to harvest the wealth and the epicenter for both is California. In the case of 2013 and bitcoin, Silicon Valley is driving a lot of the energy and feeding the funding machine. There was a major investment in Coinbase, the digital wallet that will hold all of those untraceable bitcoins by Andreesen Horowitz. PayPal lauded its merits but believe that its real utility is yet to be determined and that most consumers seem to be confused. Bitcoin junkies gathered at the second conference in, appropriately, Sin City, to discuss its hype. (We can’t tell you who attended since attendees were all anonymous and untraceable.) And, perhaps in the biggest sign yet that bitcoin is a bubble, Mel B, formerly known as Scary Spice, will accept payment in bitcoin for her new single. Here’s all the news that is news on the positive side of the bubble this week.

  • December 12, 2013- SecondMarket, a fund established to offer investors exposure to Bitcoin is holding around $65 million in the digital currency after two months in operation.
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  • December 12, 2013 – Coinbase has raised $25 million in a Series B funding round lead by Andreesen Horowitz in the largest fundraising to date for a company focused on Bitcoin digital currency. Previous investors United Square Ventures and Ribbit Capital also participated.
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  • December 12, 2013 – Wayi International Digital Entertainment a Taiwanese company that specializes in online gaming, announced that its online store would start taking bitcoins as a form of payment next year. Wayi said its online store WMall Online will start accepting bitcoin.
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  • December 11, 2013 – BitPay Inc, a leader in business solutions for virtual currencies, announces it has processed over $100 million in transactions this year.
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  • December 11, 2013 – At the second ever Bitcoin convention, the passion around the unregulated, computer-generated currency was evident.
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  • December 11, 2013 – Fidelity has partnered with SecondMarket’s Bitcoin Investment Trust to allow its clients to save for their retirement by putting the virtual currency in self-directed IRAs. Really?
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  • December 10, 2013 – Bitcoin rose up past 1,000 again.
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  • December 10, 2013 – KryptoKit was launched at the Inside Bitcoin conference. KryptoKit allows users to create a Bitcoin wallet that may be used to store BTC using a browser. It is allegedly secure and provides users with the option to backup a wallet to a file. The wallet enables users to pay with Bitcoin on almost any webpage, transferring the BTC from a wallet to a vendor.
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  • December 10, 2013 – David Marcus, CEO of PayPal, praised Bitcoin saying “I really like Bitcoin. I own bitcoins,” but he believes that people don’t totally understand what it is. Going on to say, “People are confused. They think because it’s called cryptocurrency it’s a currency. I don’t think it is a currency. It’s a store of value, a distributed ledger. It’s a great place to put assets, especially in places like Argentina with 40 percent inflation, where $1 today is worth 60 cents in a year, and a government’s currency does not hold value. It’s also a good investment vehicle if you have an appetite for risk. But it won’t be a currency until volatility slows down. Whenever the regulatory framework is clearer, and the volatility comes down, then we’ll consider it”. We say, when in Argentina, do as the Argentinians do, buy dollars.
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  • December 9, 2013 – Former Spice Girl Mel B is making musical history my becoming the first mainstream musician to accept bitcoin as payment to purchase a copy of her upcoming single “For Once in My Life” starting December 25. Brown explained the saying “Bitcoin unites my fans around the world using one currency. They can just pay using bitcoins”!
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  • December 9, 2013 – Pressat, a digital service for assisting companies across Europe with their public relations needs, has today confirmed that they are accepting the Bitcoin currency as a form of payment. 
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Bubble Busters

Where there are visions of massive wealth overnight, there are the bad guys horning on to ruin all of the fun. The gold rush of 1849 was wrought with bad guys who lied, cheated, stole and killed people in order to exploit the hysteria that took hold at the time. Hmm. Another week, another story about the theft of bitcoin from “unsuspecting” people who lost it all but have no recourse because nothing is traceable. We also really hope that people don’t take the Fidelity retirement offer too seriously. Not only do bitcoin miners spend 3x more to get their bitcoin than they gain, but less than 1,000 people control half of the bitcoin supply. We wish we knew who they were! Adding to that, the bad guys keep stealing stuff and South Korea put the kibosh on accepting it as currency as did Apple. Switzerland, keeping its reputation in tact as the neutral party, has said that it will vote to decide whether bitcoin would be considered a foreign currency (but the tea leaves don’t look promising). 

  • December 11, 2013 – Bitcoin miners spend approximately $17 million on this task each day and at current valuations, only make bitcoin worth $4.4 million. For most people to actually profit off their bitcoin-mining efforts, the asset needs to continue to dramatically increase in value.
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  • December 11, 2013 – Ernst & Young warns that Bitcoin should not be seen as a currency and an expert on digital currencies cleared up the myths behind Bitcoin.
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  • December 10, 2013 – Lawmakers in Switzerland announced they will vote on a proposal submitted to the Swiss Parliament to decide whether bitcoin would be treated as a foreign currency. In a press statement, the law body wrote that “members, coming from major parties such as SP, FDP, GLP and the Greens, have concluded that bitcoin and comparable digital currencies not only pose risks, but also opportunities for Switzerland’s financial sector”.
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  • December 10, 2013 – South Korea joined the list of countries that reject Bitcoin and other forms for virtual currency as legitimate currencies. Bank of Korea Gov. Kim Choong-soo reiterated Korea’s position on Bitcoin, saying that the cyber currency had very little potential to evolve into or function like real money.
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  • December 10, 2013 – 927 people control half of the market cap of Bitcoins, proving it is an extremely lopsided.
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  • December 9, 2013 – Apple removed Coinbase and Gliph from the App store. Apple’s devision was based largely off of section 22.1 of Apple’s App Store review guidelines. The rule states that “apps must comply with all legal requirements in any location where they are made available to users. It is the developer’s obligation to understand and conform to all local laws”.
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  • December 9, 2013 – Economist and Nobel Prize Winner, Paul Krugman continues to be skeptical about Bitcoin and what has driven the recent surge of the bitcoin,  “in principle, you can have assets, which are considered valuable, even though there is nothing backing them”.
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  • December 7, 2013 – Bitcoin’s value dropped by 50 percent in one day, resulting from China’s halting its trade. On Mt.GoX’s, the largest  trader of bitcoin, the value of 1 bitcoin at one point dropped as low as US$576 on December 7, nearly a 50 percent drop from before.
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  • December 6, 2013 – Bitcoin prices tumbled almost 13% Friday after an affiliate of China’s biggest Internet search company, Baidu Jiasule, stopped accepting payment in the virtual currency following a warning by China’s central bank.
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  • December 5, 2013 – Schemes and frauds involving digital money have gone largely unchecked, including recent ones on twitter lead by a trader known on Twitter as Fontas. Since Government authorities do not agree on which laws apply to Bitcoin as Fonas say “the lack of regulations allows everything to happen”.
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Bitcoin Bubble Tracker | Week 1

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