Feed aggregator

​Fatal finance? Bankers in Netherlands, Liechtenstein found dead

RT -

Jan Peter Schmittmann, the 57-year old former head of domestic operations at ABN AMRO was found dead on Saturday in the wealthy Amsterdam commuter town of Laren. He was discovered along with the bodies of his 57-year-old wife, and 22-year-old daughter.

The mother and daughter were killed by the father, after this the father killed himself,” Reuters cites a police statement. Police said that Schmittmann left a suicide note, but did not provide any further detail.

Family members said that Schmittmann had suffered from serious depression.

Schmittmann left the bank in 2008 after nationalization, At the time ABN AMRO was one of the largest banks in the world, a household name and a symbol of Dutch financial strength. As compensation he was promised a $21.99 million pay off. In the end he got only half, as Finance Minister Wouter Bos considered the sum exorbitant.

Since 2010 he was the owner and director of 5 Park Lane, a company that advised private equity investors.

This is the second unusual incident related to ABN AMRO in the past five years. In 2009, former chief financial officer Huibert Boumeester was found dead in woodland near London in an apparent suicide a year after he had left the bank.

In 2007 Royal Bank of Scotland, acquired ABN AMRO at the height of the economic boom for $100 billion. But the financial crisis forced the Dutch state to nationalize its domestic operations, resurrecting the ABN AMRO name.

On Monday, another bank chief executive was found dead in Liechtenstein.

Juergen Frick, the 48-year old head of Liechtenstein-based Bank Frick was found shot dead in a car park. Police believe Juergen Hermann, a former fund manager, shot the banker and then took his own life, according to Swiss media.

Police said they believe Hermann, who escaped from the scene may have taken his own life. They said they found his abandoned car with his passport and a confession that included "parting words".

On the suspect's website, he refers to himself as the "Robin Hood of Liechtenstein" and is reported to have spent years acting against Bank Frick and the Liechtenstein authorities over financial matters.

These recent fatalities add to the growing number of suicides and mysterious deaths in the financial world. Three sudden deaths at JP Morgan and 6 in the global financial world happened in just few weeks in February.

Financial jobs are notorious for extra-long hours and huge level of stress.

The President is a Bully: Obama Issues Threats To Russia And NATO

Socialism OnLine! -

URL: http://www.counterpunch.org/2014/04/07/the-president-is-a-bully/

The President is a Bully: Obama Issues Threats To Russia And NATO. "The Obama regime has issued simultaneous threats to the enemy it is making out of Russia and to its European NATO allies on which Washington is relying to support sanctions on Russia. This cannot end well..."

Topic(s): Geography:  Vote Up/Down

Up close & personal: RT reporters featured in new documentary

RT -

He’s filmed the lives of fishermen working in some of the most inhospitable waters on the planet and watched contestants overcome their deepest fears. Now Silberman is set to see months of hard work come alive with the premier of ‘News Team’, which he says is “one of the finest shows I’ve ever been a part of.”

News Team is a 20-part series which follows the lives of seven RT reporters as they travel the globe bringing the latest stories to our screens. Becoming a reporter is a dream that many aspire to, however Silberman tries to show the reality of what is a difficult, time-consuming and at times dangerous occupation.

“I don’t think it’s a TV show about TV. I think it’s a TV show about people. People that risk their lives to tell the world about what’s happening outside of their living rooms,” he said.

It was curiosity more than anything that led Silberman to want to produce a documentary series about news reporting and he stated he chose to work with RT due to the team’s ability to think differently as well as the access they are allowed because of their “political and geographical standing,” while he was quick to add how none of his preconceptions about the difficulty of working in Russia were, in fact, true.

“I thought I would run into a bureaucratic nightmare working with a Russian-based news agency. However, it was the opposite. RT let me tell the story that actually happened and never baulked at any of the footage, story or situations that were aired,” Silberman added.

The American has managed to fit a lot into his short, but productive career. He has gained a reputation for producing some of the most inhospitable places on the planet in order to give viewers an insight into people’s professions and News Team has proved no different.

“I’ve worked a lot chronicling people’s enduring, extreme and sometimes crazy professions on numerous shows like Ice Road Truckers, Flying Wild Alaska, Mall Cops and Deadliest Catch,” said the 33-year-old. “I think ‘news correspondents’ was the next logical step for a TV series because it doesn’t get any more real, unpredictable or exciting than the news, especially in a warzone.”

The seven reporters - Maria Finoshina, Margaret Howell, Thabang Motsei, Peter Oliver, Egor Piskunov, Paula Slier and Aleksey Yaroshevsky - are followed around the clock to wherever the latest breaking stories take them. The viewer gets to experience what it’s like to report in a war zone and how a correspondent deals with some of the less glamorous aspects of the job, such as sorting through hours of footage to produce a report of just a couple of minutes. However, what interested Silberman, who was named the 2011 Producer of the Year by the Producers’ Guild of America (PGA), was how the characters developed during the series.

“It was surprising to see how each journalist came to view and cover their stories differently, not just in regards to politics, but in terms of allowing their personality and background to factor into their reports,” the Milwaukee native commented. “These weren’t a bunch of RT robots on the ground, but different people from different walks of life, telling stories sanctioned by RT, but with their own personal approach.”

It is a step into the unknown for both RT and for Silberman, and he believes that the viewers will build an instant rapport with the seven featured reporters.

“I think viewers will connect with the characters. It’s not about what they are saying, but how it’s being said. It’s their honesty, dedication and passion honesty to telling the story is so real and transcends politics.”

You can already watch the first episode on RT

Open Letter to Washington DC: What Bitcoin Can Teach You About the State Department’s Missing Six Billion Dollars

Bitcoin Magazine -

Open Letter to Washington DC. What Bitcoin Can Teach You About the State Department’s Missing Six Billion Dollars

Dear Washington DC,

It has recently come to my attention that you’ve misplaced another SIX BILLION DOLLARS. This time it was the State Department. Where did it go? The Washington Times reports the Inspector General’s audit uncovering the details that look like gross mismanagement or corruption. Although uncovering mismanagement and fraud is the department’s job it can also be politically dangerous. Angry Democrats turned on this same Inspector General following their report about possible use of the IRS as an intimidation tool to benefit the Obama election.

Washington, we’ve seen this before. For a quick recap; in 2005 you lost track of NINE BILLION DOLLARS in Iraq. In 2012 you were caught and fined another 3.4 BILLION in settlement for “lost” trust funds for American Indian Trusts. This pattern of Federal Government incompetence or fraud seems to repeat ad infinitum from web search engines that never forget.

The problem with having one government department watching over another department, has proven that eventually either a partnership or adversary relationship often develops. If potentially unpopular data emerges that would embarrass the current administration of the day, we know it can be buried by somebody with the right connections before the public catches wind, somebody changes a rule, or fires the right person at the right time and it is the American people who suffer. To illustrate, we don’t have to go far.

The Inspector General’s assessment from August 2013 issued a warning about possible upcoming Obamacare privacy problems. They predicted then that privacy safeguards weren’t being implemented adequately in the rush to get the program rolled out in time. It only took a month for this concern to prove a reality. Because of the highly charged political ramifications and embarrassment, rather than fix the problem … two months later you fixed it by “Cheating”. You changed the rules so privacy breaches no longer needed to be reported. Only a month after that, Obamacare health care exchanges were called a hacker’s dream. Is it any wonder why there is no rush of people signing up?

You see Washington, that’s where we’ve got a problem.There’s got to be a better way. Your strategy of hiding and obscuring fraud and then enacting a strategy to intimidate is the modern day equivalent of “kill the messenger”. It only proves to us that we can’t trust you to police yourself. But bitcoin has it covered…

We have an app for that.

Six billion dollars is pretty hard to misplace. It’s currently more than the entire market cap of bitcoin. Yet, in the world of bitcoin and the block-chain ledger, we can account for every penny’s worth of bitcoin – as it is all transparently recorded in the block-chain. We might not know who exactly owns it, but we can see it. This ability to issue commonly known public key addresses assigned to designated departmental accounts would allow you to follow the money. As you already have the NSA helping you listen to every phone call, and can probably help me find my missing Milli Vanilli mp3 songs I “legally” copied to my hard drive – one might wonder why you can’t find a pile of money big enough to fill a six car garage of $100 dollar bills.

I understand your need privacy for the State Department funds. But did you also know you can use the block-chain ledger to keep private accounts secret as well? The block-chain technology is perfect for both sides. For your auditing team, they will need to know the private keys to those private ledger accounts so they can verify the money ended up where it was supposed to. The reports indicate you can’t even find the contracts for the missing funds. Those too can be stored in the block-chain. The public would learn to trust triple entry book accounting much more than a department of people who simply can’t be immune to intimidation or threats for reporting embarrassing troubles. The reported data of the Office of Inspector General can be easily followed by others. This removes them from the equation as the facts become self-evident and will stand on their own.

There is a long list of countries that have defaulted on international debt obligations loaned from other countries. How does a creditor trust that money they lent to a government will be used properly in a way that will allow it to sustain itself? When Greece was bailed out several times, how many government officials and auditors were fooled into believing Greece’s own self-reported accounting? They found, to their horror, the debt hole they dug themselves was far deeper and much worse than they reported. The Greek banking implosion threatened to take the entire Eurozone with it and involved fraud on a massive scale.

With the invention of Bitcoin’s block-chain, is it possible that it’s just a matter of time before the creditors come to understand the immense benefits of the ledger? The transparency opportunity it provides might be the game-changer. International lenders might find that putting trust in the trustless transaction system was the key to verifying loans are used as they were intended. The mechanisms that allow transparency will finally make these countries accountable to the lenders and their own people.

Washington, I’m sure you agree that these countries should be held accountable. Perhaps you agree that this system might be more effective than our current strategy of just throwing money at the problem. While their citizens remain in poverty, their ruling elite suddenly drive new Lexus and Mercedes. Imagine for a moment the good that could come to their citizens to have the information they need hold their governments responsible. Think of what citizens of Venezuela could do to expose the lies and brutality that seems to be tearing itself apart with half of the country still believing the government leaders who continue to point fingers in every direction but themselves.

Vice knows she’s ugly, so puts on her mask*. Corruption requires darkness and secrecy to continue its cancerous nature. If we can agree it is reasonable to hold foreign countries accountable through enlightened transparency, can we take our own medicine?

Bitcoin technology can afford your constituents the ability to “follow the money” as well. Is it reasonable that we would also hold you accountable for the funds you taxed from us? Perhaps one day we might consider adding this new ability as a requirement to the current Freedom of Information Act. I suspect we’ll see resistance from those with the most to lose. But active resistance to this movement might illuminate who is benefiting the most by secrecy, and by extension, the most likely to abuse that power. Those who protest the loudest should be scrutinized first and most thoroughly. To paraphrase Shakespeare: those officials doth protest too much.

Consider for a moment what you can save in budgets. We wouldn’t need nearly as many auditors, accountants, clerks, and the overhead in HR, risk management, project managers, quality control departments, building maintenance and security that go with them. With programmable money and a few clicks, you can see exactly where it goes if you are consistent and insist on compliance and transparency at every level. By using public wallets created for each account and each department, the trustless system could work in the same ways. It could offer better protection by using third party signatures to verify authorization to move the money when appropriate. Putting money into trusts for social security would allow citizens to watch their own retirement accounts and validate they aren’t raided for other projects. Would this require you to exercise more discipline? Yes. Would this happen overnight? No. It might take generations to get the house in order. We didn’t get into 18 trillion dollars of debt overnight; is there a better plan?

Washington, how many people are employed at various government offices that are assigned to audit, track, account, disperse, authorize, supervise, collect, budget, and grant authorization to spend money? Do we really need to be paying for all this redundancy? Do you think these unfortunate workers stood up in elementary school and proudly declared to the classroom that they wanted to grow up and babysit numbers through accounting ledgers all day? Do you think they now sit at their desks under fluorescent artificial lights staring at numbers and praying silently to just…make… it …until… Friday?

Then the downtrodden then go back in on Monday and repeat…year after year. Do you think this work is fulfilling to them? They painfully endure office politics, employee reviews, cost of living increases, and unclean break rooms. They are silently embarrassed to admit they are encouraged to spend every last drop of their budget each year because if they don’t, their reward for efficiency will be an even smaller budget for the next. The funds in transparent block-chain accounts might provide opportunities to liberate them from their shackles, cleverly disguised as office chairs.

Imagine for a moment a world where we can train them to be scientists, musicians or artists. Classrooms of the next generation of students can be guided to study science, math, art, history, medicine, and education. Those are the productive GDP increasing jobs that inspire a person to feel their work is worth-while and fulfilling. There will likely be many who would gladly take up an offer to be retrained into new important and interesting fields of study. Imagine hundreds of billions saved through consolidation and transparency, money suddenly freed from the bondage of obsolete departments could be diverted into new futuristic fields of study.

Imagine ways we can repair our planet and put new savings into paying off our national debt, funding NASA again and once again leading the world in science. We might cure diseases or build wondrous monuments to the world. With funding for a new army of educators, they could prepare our children for a dignified future off the streets and out of jail. Our world needs more artists because the imagination of artists acts as the pathway of light that science then follows. The technology stored in the block-chain has the potential to unlock the potential in people currently wasting time looking at numbers change columns to make all these possibilities come true. Imagine the possibilities.

But that is then, and we must return to now. Let the current embarrassment of the State Department’s six billion dollar oversight be the catalyst for change.

*Poor Richard’s Almanac

Special thanks to James D’Angelo for additional insight in this subject. Please visit his “Bitcoin Blackboard 101 Series” on YouTube for further information.

The post Open Letter to Washington DC: What Bitcoin Can Teach You About the State Department’s Missing Six Billion Dollars appeared first on Bitcoin Magazine.

BitPay Expands to Amsterdam

Bitcoin Magazine -

Bitcoin payment processor BitPay has achieved rapid growth since its founding, and in the past month the company has opened locations throughout the world. With new Latin American headquarters and recently opened locations in San Francisco and New York, the company seems to truly be working to become the largest global Bitcoin payment processor.

Last week, BitPay announced the opening of their European headquarters in Amsterdam, exactly two weeks after the company announced openings of their additional locations and the onboarding of key personnel throughout the world. The Amsterdam headquarters will handle sales, implementation and support to the 7,000 current European merchants.

Joining the BitPay team will be Moe Levin as the European Director of Business Development who will work toward the company’s goal of growing to 30,000 merchants by the end of 2014. Before Bitcoin and BitPay, Levin served in various roles in management, marketing, entertainment and event management after graduating Magna Cum Laude from York University. Levin is actively involved in the Bitcoin community and recently arranged Bitcoin conferences in Amsterdam, as well as one of the largest US conferences in Miami Beach.

Also joining the team in Amsterdam as Senior Sales Engineer is Pieter Poorthuis, who will be responsible for sales and customer implementations throughout Europe. Poorthuis has experience in the finance industry, having previously managed the implementations of ING’s mobile payment products, with specialty in contactless payments.

In addition to opening the European headquarters, BitPay has also added former General Manager of Mastercard in the Netherlands, Marcel Roelants to the company’s Board of Advisors. “As the world of payments is changing rapidly, BitPay is at the forefront offering technology and support to merchants,” Roelants stated in a recent press release. “Establishing its headquarters in Amsterdam is a great way to be closer to its European customers.”

With the addition of two employees in Amsterdam, the Atlanta based payment processor has reached 33 full-time employees worldwide. In a single year the company has achieved vast growth in personnel and the amount of countries and merchants serviced; BitPay currently has over 26,000 merchants worldwide. Co-founders Tony Gallippi and Stephen Pair along with other key personnel are known as thought leaders in the Bitcoin space and have also been featured as speakers at several conferences around the world.

In fact, the company is sponsoring the Bitcoin Foundation’s Bitcoin2014 conference in Amsterdam, and will be exhibiting at The Next Web conference later this month. For many involved with Bitcoin, the continued adoption and technological advancement of virtual currency has heavy implications on the future of finance and the global economy. BitPay and many other companies provide solutions for businesses to begin accepting the popular cryptocurrency. If in fact Bitcoin is the future payment method, payment processors like BitPay will be positively positioned to provide merchant-to-consumer solutions throughout the world. “Being Bitcoin ready is about more than accepting bitcoin, it’s about being ready for the future,” says Levin.

The post BitPay Expands to Amsterdam appeared first on Bitcoin Magazine.

BitAccess Presenting to Canadian Senate

Bitcoin Magazine -

Ottawa, ON – Locally owned and operated BitAccess announced today that it will be appearing before the Canadian Senate’s Standing Committee on Banking, Trade and Commerce on April 9th, 2014. Co-founder Haseeb Awan is expected to present the ATM’s unique capabilities and assist Senator Irving Gerstein in purchasing some bitcoin from the machine. Mr. Awan will also be discussing the benefits of their technology.

The in-person demonstration by BitAccess to key government decision makers is expected to educate the Senate committee on bitcoin’s accessibility and ease of use. This will mark BitAccess’ first global showcase of their latest, 3rd generation, two-way ATM that both buys and sells bitcoin.

“[The Bitcoin] industry will flourish with regulations in place, however everyone involved in the process need to understand the protocol and implementations in detail before [regulating it]” Awan says. This demonstration marks a very important milestone for Bitcoin in Canada as it is the first time elected officials will publicly purchase bitcoin. The Canadian Senate is pursuing an 18-month long study into the “Risks, Advantages and Promises of Digital Currency” that, so far, has been primarly concerned with bitcoin and the Bitcoin protocol.

About BitAccess

BitAccess, founded in 2013, is an Ottawa-based start-up with local manufacturing facilities. The company currently employs 10 individuals and is growing quickly. BitAccess manufactures digital kiosks capable of converting fiat currencies, such as the Canadian Dollar, into digital currencies, and back into fiat currencies. Their latest model features the most advanced ID verification technology on the market, and it is the most physically secure model produced by BitAccess to date. The company has a customer base in 10 different countries across 4 continents. For more information on BitAccess, please visit www.bitaccess.co

About the Senate of Canada’s Study

The Senate of Canada’s Committee on Banking, Trade and Commerce has just begun its 18-month long study on the use of digital currencies. Specifically, the committee is looking to understand potential risks, threats and advantages to electronic forms of exchange; at this point they are understanding digital currency. The committee has heard from the Department of Finance Canada, the Bank of Canada, an economic historian, a professor from the Rotman School of Management at the University of Toronto, and a cryptography professor from Concordia. The committee meeting is open to the public and the audio will be webcasted. It will also be televised for future broadcast. For additional information on this hearing, please visit www.senate-senat.ca/banc.asp


To learn more about this event, please contact:
Victoria van Eyk
Bitcoin Strategy Group
139 Bank Street, Suite 200
Ottawa, Ontario, K1P 5N7
Office: (613) 898-8674


The post BitAccess Presenting to Canadian Senate appeared first on Bitcoin Magazine.

Bitcoin Hearing For Small Businesses

Bitcoin Magazine -

Last Wednesday, the Committee on Small Business held a hearing aimed at exploring Bitcoin, the benefits and risks for small businesses. The hearing was attended by financial, legislative, economics and leading Bitcoin professionals. “Bitcoin: Examining the Benefits and Risks for Small Businesses,” was one of the first hearings to be entirely focused on how Bitcoin can affect small business.

Those appearing at the hearing to give testimony were Jerry Brito, Senior Researcher at the Mercatus Center; Adam White, Director of Business Development and Sales at Coinbase; Mark Williams, Master Lecturer in Finance at Boston University School of Management; and L. Michael Couvillion, Ph.D., Associate Professor of Economics at Plymouth State University. Wednesday’s hearing was overseen and moderated by Missouri Republican and committee chairman Sam Graves.

The meeting on Capital Hill gave insight into the ins and outs of Bitcoin for small business. Chairman Sam Graves began the discussion by explaining the purpose of the meeting: “We have invited a distinguished panel of experts who will explain what Bitcoin is, how it operates, why it might be a good fit for small businesses and what are the risks associated with Bitcoin.” Throughout the hearing, the committee hoped to provide information in order to put small businesses with a better position and understanding regarding adopting Bitcoin, and if it could be a way to increase customers.

Also discussed was the inherent benefits of Bitcoin in commerce, providing merchants a way to process payment in a manner that eliminates fraud, has low processing fees and allows for market expansion. Adam White of Coinbase stated in his testimony,

“Bitcoin enables individuals to push payments to merchants without having to share personally identifiable information that can be intercepted by criminals and used for fraudulent purposes. This push functionality gives Bitcoin a unique characteristic that eliminates the risk of fraud, something that merchants, card processors, and banks spend billions of dollars per year combatting.”

White obviously focused on the positive traits of Bitcoin, however other topics discussed were related to price volatility, tax implications and dangers of illicit activities. Overall, the hearing gave positive insight into the use of cryptocurrencies as payment method, while also providing extensive information and first hand experience. Rather than making quick judgments and conclusions, the committee has set a great example of how to handle new and disruptive technologies like Bitcoin. The hearing proposed obvious benefits and challenges for small businesses choosing to accept Bitcoin as payment for goods and services.

Lower Processing Fees and Global Payment – The entire panel spoke of the reduction in fees that Bitcoin makes possible. Additionally, Bitcoin also allows users to bypass costly exchange rates, meaning that businesses can transact globally without affecting profit margins. “If you are a small-margin business, that difference could mean doubling your profits,” stated Jerry Brito.

Elimination of Fraud – Bitcoin can protect small businesses from chargebacks and transactions reversal from third parties, because there is no central intermediary. The fraud fees from credit card transactions could be detrimental to a business’s future by getting kicked out of the credit card networks. Bitcoin requires agreement by both parties to complete a transaction.

New Market Expansion – Because Bitcoin is a new technology in the payment space many companies are jumping on board, which differentiates their business from the competition. The cryptocurrency can also help drive sales. For example, in two months since the decision to accept Bitcoin, Overstock.com reported over $1 Million in Bitcoin transactions.

Volatility – Price volatility tends to be one of the biggest challenges faced by the growing cryptocurrency. How can something financially viable fluctuate in price so heavily? The expectation is that Bitcoin should be perfect right away. The reality, there is more work to be done, as with any new technology seeking widespread adoption. However, businesses should not worry because there are many companies in the Bitcoin community that allow merchants to settle Bitcoin in their local currency.

Security – In terms of security, the hearing contained discussions in regards to, as Mark Williams states, the “virtual bank heist” of Mt. Gox and others as vulnerabilities of Bitcoin. The committee also explored the risks of wallet theft, while Brito observed the absence of an intermediary to replace stolen Bitcoins.

Also discussed in the hearing was tax implications surrounding the IRS announcement to treat Bitcoin as property as well as illicit activity and how it relates to the cryptocurrency.

What does the hearing do for the future of Bitcoin in small business?

The hearing held by the Committee on Small Business is a step in the right direction toward better understanding of Bitcoin and what it can provide for business of all sizes. Entrepreneurs and company leaders will likely look closer into how virtual currency like Bitcoin can benefit their operations.

According to L. Michael Couvillion, “Bitcoin represents a much cheaper payment processing system compared with credit/debit cards. Its swipe fee is $0.15 compared with $0.25 for credit cards, and a typical Bitcoin wallet provider has a 1% fee compared with about 3% for credit cards. This results in cash flows which are between 7.5% (for micro sales) and 1.6% (for large sales) higher If a customer chooses to pay with Bitcoin rather than a credit card.”

The idea that Bitcoin can not only save money on processing fees, eliminate chargebacks and fraud, all while making global transactions possible makes complete sense to many business owners already accepting Bitcoin. For those that haven’t taken the first step, luckily there is an abundance of information to be found on the topic, as well as an entire community available to help along the way. Bitcoin has the ability to change the small business economy by increasing savings on transaction and fraud fees, and enabling businesses to transact with an expanding global marketplace.

The post Bitcoin Hearing For Small Businesses appeared first on Bitcoin Magazine.

Searching for the True Value of a Bitcoin

Bitcoin Magazine -

This was written by Vinny Lingham , the CEO and co-founder of Gyft.com and originally posted at https://medium.com/p/ba5f3fcce103.

As Bitcoin stabilizes below $500 for the first time since its eye-popping run to over $1,000 in November 2013, many crypto pundits are scratching their heads and trying to make sense of the current weakness — especially given the excitement & innovation that we are seeing within the global Bitcoin community. Venture capital has also been pouring into Bitcoin startups at a rabid pace (north of $100m so far this past year). However, over the past couple of days, I’ve had numerous friends contact me asking the same question : “What’s happening with Bitcoin?”

Bitcoin is currently trying to finding an equilibrium point — at least at the current volume levels — given all the recent disruptions to the ecosystem (including the recent MtGox collapse). Equilibrium would be defined for me as the point of stability in price where there is symetric volume and consistent growth on a daily basis between buyers and sellers (utopian, but right now there is asymmetric growth which is not being quantified — so traders are having a problem predicting where it would go).

History shows that it needs to find a very stable price point for a few months before it can really retest any previous highs. External factors like Russia, Ukraine, China, etc will contribute to Bitcoin volatility and changes in the supply/demand curve globally.

I spent some time at the CoinSummit conference in San Francisco last week and my panel discussion, “Bitcoin transactions — what are the barriers for merchant and consumer adoption?” was well received by the community.

It’s very clear that Bitcoin has amazing potential but the fact remains that we are still in the very early stages of its evolution — which many have likened to the Internet in 1993. Mainstream consumer adoption is just not there yet. We’re waiting for the “Netscape moment” for Bitcoin.

I also don’t believe Bitcoin is suitable as currency — I think it’s a commodity that can be traded for goods and services. It may become a currency in time, but it just isn’t one right now. It’s a scarce, digital commodity — and the trading that takes place on exchanges really reflects the market sentiment around the value of this digital commodity.

In the not too distant future, entrepreneurs and technologists will use the actual Bitcoins themselves in new and interesting ways (think smart contracts, etc.) —how many will be ultimately needed is unknown, and that’s what creates the imbalance in price. Right now it’s all speculation as to what that future value of a Bitcoin will equate to. This is what makes the Blockchain far more interesting than the actual Bitcoin — but I’ll leave that for a future post.

I have some alternative views (i.e. not stuff the mainstream press totally gets), as to why Bitcoin is trading below $500 right now, but I want to point out that I am a Bitcoin bull for the long term. I even predicted at the Silicon Valley Bitcoin Conference in May 2013, it would reach over $1,000 in 2013 when it was trading at $100 to audible snickers and laughs from a very Bitcoin friendly audience.

That said, conversely, here are the key reasons why I think the Bitcoin price may not organically reach $1,000 again this year, without an external event shifting the supply/demand curve for Bitcoin. It is difficult to predict anything further out than a single quarter in the Bitcoin world, so instead of making bold predictions I would rather focus on highlighting some issues that are suppressing the Bitcoin right now.

TechCrunch published a story yesterday about the recent IRS rulings around Bitcoin — which classifies it as an asset, not a currency (which effectively makes transactions using it taxable). To be frank, anyone who thought that Bitcoin would not be subject to taxes in some form is living in a dream world.

Anyone who made 5000%+ returns over the past year or so should not be complaining about paying capital gains tax — it could have been worse and been classified as income tax. That said, it will have an impact on the price of Bitcoin as some people holding them will need to sell some of their coins ahead of tax filing next month.

The real impact is that the notion that Bitcoin is a “deflationary” currency vs the USD has effectively been dispelled. Any deflationary gains have to be offset via capital gains taxes. This does not mean that it is not deflationary vs other currencies, but given the IRS has given strong guidance here — it’s effectively mooted in the USA. It will remain a store of value, but it clearly is not a currency in its current form.

The upside of the IRS guidance is that given it’s not classified as a currency, you can buy and hold Bitcoin for years and never pay taxes until you realize the gain. Contrast that against the treatment of foreign currency holdings (and subsequent appreciation against the USD) and you’ll see it’s a fair outcome.

The IRS guidance when coupled with unconfirmed rumours that China is “banning” Bitcoin has led the mainstream press to postulate that these are the reasons for the current weakness in the price.

I’d like to offer some alternative views:

Merchant adoption is outpacing consumer adoption

This is a key issue that is creating sell side pressure for Bitcoin. The number of new merchants now accepting Bitcoin globally has grown in the region of 5-10 times in the past six months, especially since Bitcoin popped late last year and became an increasingly valuable (albeit volatile) asset to own. The number of consumers (and realistically, mainstream consumers) using Bitcoin has grown fractionally in the same period — partially due to the perceived price and some other issues which I’ll dive into below. One reason is that the promise of micropayments for Bitcoin has not been realized, which is what is holding back mainstream adoption.

What’s now happening when new merchants start accepting Bitcoin is that it’s giving people who have existing coins the ability to use it as a currency and effectively “sell” their coins to the merchant. The processors such as BitPay (which Gyft uses to sell gift cards) then in turn either sells these coins to private buyers (off book) or via exchanges (such as Bitstamp) to exchange for local currency for the merchants. This money is understandably used to continue to replenish inventory and operate their business, and more importantly, pay taxes to Uncle Sam.

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.

As the number of transactions via Bitcoin processors increase, it ultimately creates more sellers in the marketplace — which obviously creates downward pressure on the trading price. Now, I’m not saying that this is a bad thing in the long term, but the problem is that if you have asymmetric growth in new Bitcoin users and Bitcoin “acceptors”, it will create a lopsided marketplace which will suppress the price — which is exactly what is currently happening. We’re seeing the impact of this in the market right now, I believe. There is another factor, which brings me to my next point.

Lack of trust with exchanges and limited ability to purchase

Consumers are spooked right now. MtGox ran away with $500m+ in Bitcoins and is bankrupt. No one really trusts any of the exchanges — even some smaller exchanges went under the past 3 months. The only “safe” place to buy Bitcoin in the USA is via Coinbase and they are not an exchange.

The US does not have a single licensed Bitcoin exchange and the rest of the world is reeling from MtGox. Bitstamp is proving to be the new global exchange of choice but the media has done a great job of keeping new potential Bitcoin users at bay with the usual inflammatory headlines whenever something negative happens in the Bitcoin space.

Most people I know who want to buy and sell Bitcoin are doing it “off-book” — which means the transactions are going instead via trusted networks. This will take buyers out of the marketplace and will ultimately mask the true supply/demand curve for Bitcoin. Anyone who doesn’t know a buyer will sell their coins via an exchange or via a merchant accepting Bitcoin which will put sell side pressure on the BTC price.

So instead of “buy side” money winding up in the exchanges which would be used to drive up the price, it’s sitting on the sidelines which has the impact of lowering the demand side of the equation within the marketplaces where Bitcoin is priced.

Loss of momentum

Given the above, the Bitcoin price has been struggling and this creates downward momentum. The good news is that it keeps out the “get rich quick” types (for now) who typically almost justify the reasoning of some of the non-believers who think that Bitcoin is a Ponzi scheme.

In reality, anyone who buys Bitcoin with the view that it can only go up and up forever is most likely a speculative and uninformed buyer who will sell at the first sign of blood. Although every new technology will have these buyers, the recent dip in prices is likely to keep these types away and as a result, less speculative buying which will allow Bitcoin time to find equilibrium, before it runs again (historically Bitcoin goes through spikes and consolidation phases regularly).

Again, a lack of buyers will leave Bitcoin with a lower settling price and equilibrium point in the broader market.

Miners margins being squeezed

If you were a miner 2-5 years ago, you could comfortably mine Bitcoins and make profit margins of 50-95%. Input costs would have been electricity and additional hardware. The difficulty of mining was low and it was not very competitive, so labor costs were cheap (hobbyists mainly) and you didn’t have to invest in chip R&D.. Since then, we’ve seen a surge in competition amongst miners and an astronomical increase in the difficulty index (far outpacing the price growth in the actual Bitcoin).

Miners were mining 50 coins every 10 minutes just over a year ago. With the geometric progression in the distribution of coins that happens every 4 years, the allocation is now 25 coins every 10 minutes. Less coins, albeit at a higher price. Even six months ago, miners were probably holding onto at least 50% of the coins they made and spending the other 50% on costs (electricity, salaries, hosting, hardware).

That number is now probably closer to 80% and dropping (lower margins at lower BTC prices and lower efficiency of mining equipment given the difficulty index). What does that mean? If miners need to cover their costs, they need to sell the BTC at market prices to pay the bills. If now they are only keeping 10% or less, then it’s another 22.5 coins on average hitting the exchanges every 10 minutes vs 12.5 coins in a 50% margin scenario (in actuality, the pools pay out on different timescales, but this is an approximation and oversimplification in order to make the point).

If someone wanted to track the flow of coins via the pools and see how many of them wound up on the exchanges or spent at retail, I think the results would be fascinating (let me know if you or someone you know has or wants to do this).

Given the reasons above, I think that Bitcoin will be range-bound in the $350-$550 range for at least the next quarter, that is, unless an external catalytic event occurs. I do think we’ll see a point of equilibrium and stability where the price stabilizes for a couple of months — when you see that, it should be a sign that a future surge is in the cards (based on historical evidence).

Disclosure: I own Bitcoins personally and within my company, Gyft, which accepts Bitcoin as a payment method. I have bought some Bitcoin today at the current price and will buy & sell them in the foreseeable future. I have every intention to keep trading Bitcoin. The information above is not to be misconstrued as investment advice. Bitcoin is a highly speculative commodity that is best traded by people who have a passion for and understanding of disruptive technologies. Please consult your financial advisor before taking any advice from someone who clearly has nothing better to do than write about Bitcoin on a Sunday evening.

The post Searching for the True Value of a Bitcoin appeared first on Bitcoin Magazine.


Subscribe to debianHELP aggregator