Bitcoin

• EU to weigh extensive sanctions on Russia (FT)
• U.S. lifts flight ban to Israel (Reuters)
• Russia says will cooperate with MH17 probe led by Netherlands (Reuters)
• Norway faces ‘concrete and credible’ terrorist threat (FT)
• Don’t Tell Anybody About This Story on HFT Power Jump Trading (BBG)
• But... but... PMI: Unilever Sales Growth Misses Estimates on Asian Slowdown (BBG)
• World’s Biggest Wealth Fund Reviews $8 Billion Russian Stake (BBG)
• Qualcomm latest US tech company to reverse in China (FT)
• Hamptons Home Sales Rise as Buyers Find More Inventory (BBG)

Newsweek's "triumphal" return to print with its expose on the wrong Satoshi Nakamoto (of "Bitcoin founder" fame) was less than, well, triumphal. So what is the eyeball starved media outlet seeking a second life to do? A screaming "grab me" epiphany of jingoist groupthink, in which we read that last week's events in Russia was "Putin's Lockerbie moment", should certainly help (and indeed it's very kind of Newsweek to have conducted all the forensic analysis and tests which confirm its magazine-selling allegations).

The future of finance has arrived and NOTHING will be the same. Smart contracts as a proof of concept are now no longer a concept. This technology makes it clear why an "investment bank in a wallet" causes banks to fear bitcoin!

The more one thinks about potential solutions to the gigantic mess we have found ourselves in as a species, the more one has come to believe we need to break apart into a vast multitude of city-states. The revolutionary concept of America in the first place was this idea of “self-governance,” something we do not posses an iota of in this day and age. As was noted recently in an academic paper published by Princeton and Northwestern, these United States have mutated into nothing short of an oligarchy. In fact, the study demonstrated that the will of the people has essentially zero impact on legislation whatsoever. The current overly centralized paradigm parasitically engulfing the planet will experience a series of spectacular collapses in the years ahead that will make 2008 look like practice. As the centralized beast episodically implodes upon itself, we will have a historic chance to remake our world in a new way that will better serve humanity. That new paradigm will consist of freedom through decentralization

On July 16, 1661, the bank of Johan Wittmacher - a Latvian merchant of Dutch descent - became the first in history to issue paper banknotes - Kreditivsedlar. After only seven years, the bank collapsed. But the idea of paper notes lived on to infect the evolution of money ever since. Today’s commercial banks take in customer deposits, maintain a laughably small portion in reserve, and use the rest of our money to make idiotic loans for their maximum benefit. When they fail, they’re bailed out by taxpayers and do the same thing all over again. In Wittmacher’s time, this was fraud. Today it’s not only legal, it’s the industry standard. So... happy birthday paper money. It’s a hell of a system you’ve brought us.

Gold, silver, oil and wheat (see table) surged today after confirmaton that a Malaysian passenger airliner was shot down over the Ukraine. The tragedy is set to be used by opposing sides as a stick to beat each other with and inflame an already very tense geopolitical situation. 

The sell off was greeted by Chinese buyers as Chinese premiums edged up to just over $1 an ounce on the Shanghai Gold Exchange (SGE).

Gold price drops this year have led to a marked increase in demand for gold as seen in very large increases in ETF holdings (See chart - Orange is Gold, Purple is absolute change in gold ETF holdings). The smart money in Asia, the West and globally continues to use price dips as an opportunity to allocate to gold.

Blythe Masters is perhaps the most maligned human being on earth by silver investors due to suspicions of JP Morgan’s manipulation in the silver market (and rightly so). Well she’s back in the news, but it has nothing to do with silver. Rather, the news relates to the fact that her ex-husband and commodities traders, Daniel Masters, has just launched a Bitcoin hedge fund from the island of Jersey, a British Crown dependency.

Eventually every bubble comes to an abrupt end

The dollar's demise has been often foretold.  The euro, SDRs, the yuan, Bitcoins all were going to be viable alternatives.  The dollar persists. 

This past Monday the US Marshals auctioned off the "Silk Road" Bitcoin wallets at a higher than expected price to a single bidder.  The Bitcoin market strengthened coming into the auction and has held on to most of the price gains.

In the alternative coin market, on the other hand, we saw panic selling of an alternative coin (but only on one site!) and aggressive selling across the spectrum of "scrypt" based coins.

• Obama Decries Big Bonuses at Bank Trading Desks as Risky  (BBG)
• India central bank seeks to swap gold to improve reserves quality (Reuters)
• There goes Q3 GDP: Arthur Strengthens to Become First Atlantic Hurricane (BBG)
• Airports Serving U.S. Tighten Checks on Stealth-Bomb Threat (BBG)
• Fear, cash shortages hinder fight against Ebola outbreak (Reuters)
• Brent Declines as Libya Rebels Say Ports Are Open (BBG)
• Shiites Train for Battle in Iraqi Holy City (WSJ)
• Dimon’s Cancer Has 90% Cure Rate With Demanding Therapy (BBG)
• Goldman says client data leaked, wants Google to delete email (Reuters)
• ECB Watchers in the Dark Look to Draghi for Illumination (BBG)

A single entity successfully scooped up the entire ~30,000 haul of Bitcoins that the US government seized from Silk Road. The successful bidder at the government's auction was V.C. Tim Draper (in partnership with Vaurum) who is infamous as the ideator of viral marketing, a marketing method for spreading a software application from customer to customer (making one wonder if the $19 million bid was more publicity stunt that investment). However, Vaurum has launched trading platforms in emerging markets, and we will be partnering with Tim to leverage the pool of ~30,000+ bitcoins as a liquidity source. The price of Bitcoin continues to rise, now at $650 - up from around $570 when the auction began.

These banks derive the bulk of their revenues from non-interest related sources - basically fee income, and then they pay roughly 70% of that out (afer expenses) in compensation. What happens when fees are but below the compensation level?

Many believe the most significant battle of our era is between the forces of Decentralization vs. Centralization. Niall Furguson takes that battle and looks at it from a historical perspective, describing it as Networks vs. Hierarchies, and warns we "need networks, for no political hierarchy, no matter how powerful, can plan all the clever things that networks spontaneously generate. But if the hierarchy comes to control the networks so much as to compromise their benign self-organizing capacities, then innovation is bound to wane."