Bitcoin

Two years ago, warning of a bubble in gold/silver/PMs was all the rage. Luckily, those days are long gone, allowing one to accumulative hard assets in peace, in a declining paper price environment, without the thundering herd in the rearview mirror. Nowadays, the ever-"vigilant" mainstream media has moved on, and has been so very observent to spot a new bubble in bitcoins. As we always do, we decided to have some fun at the MSM's expense, and tweeted the following earlier today:

USDJPY showing Bitcoin who is boss in category of parabolic moves today

— zerohedge (@zerohedge) April 4, 2013

It appears the CME heard us, and moments ago proceeded to hike margins across the entire Yen future spectrum by anywhere between 19% and 33%.

Curious why so little has been said about cash flowing out of Italy's banks, especially when even UniCredit's CEO today proudly warned everyone he is all for confiscating uninsured deposits as long as "everyone else is doing it" - and no, he is not kidding, so when it does happen, nobody will be able to say they weren't warned. Maybe it is because Italian cash is actually not leaving the country at all. Instead, real "wealth" is departing the boot-shaped nation, quietly and under the radar, as fast as it can in another form: gold. As the clip below from Bloomberg shows, a car was intercepted at the Italy-Switzerland border, with a very special cargo: numerous bars of gold weighing a whopping one ton, worth $6 million. Furthermore, one can be absolutely certain that for every car that is caught at the border with a ton of "golden" cargo, there are 99 that pass through undisturbed and undetected. Which makes perfect sense: what better way to circumvent shadow capital controls such as those virtually everywhere in Europe, than to convert one's paper money within country A so it stays in country A, into a far more valuable, anonymous and transportable store of wealth, such as gold, and quietly move it to country B, the one where the risk of deposit confiscation is (for now at least) far less?

What currency is feared by the European Central Bank as a threat to fiat monetary institutions?  What currency is cash like but digitally transmittable allowing for ultimate anonymity and global mobility? What digital currency is up over 2,200% over the last year? The answer?  Bitcoin. From mining, supply, demand, and security, Visual Capitalist's infographic covers it all.

With all three major non-Fed central banks on the tape today, all economic data will be merely "noise" as the market digests what the central-planners' intentions are. The BOJ came and went, and following its substantial balance sheet expansion announcement, which many called "shocking and awing" the USDJPY has pushed higher by 2.5 big figures, although not reaching the 96 levels seen prior to Kuroda's actual announcement. In fact, from this point on there is likely downside as Japan's biggest export competitor, South Korea, has no choice but to join the race to debase which in turn will be JPY-positive. The Bank of England is next, which as expected did nothing moments ago, and will keep doing nothing until Carney joins officially this summer. In some 45 minutes, the ECB headlines will hit the tape where Draghi may bur more likely may not lower deposit rates, and instead will focus on recent deterioration in the economy. None of this will be surprising, and the EUR continues to trade sufficiently weak in line with sub-200DMA levels seen in the past few weeks. What we look forward to the most will be Draghi once again discussing the legal term-sheet details of the ECB's OMT program. His answer will be amusing as there still is no answer, and the OMT is for all intents and purposes the biggest straw man ever conceived by a central bank.

I asked the question: is Bitcoin money? (It's price sure is rising parabolically like silver in 2011) In brief, I said no it’s an irredeemable currency.  This generated some controversy in the Bitcoin community.  I took it for granted that everyone would agree that money had to be a tangible good, but it turns out that requirement is not obvious.  This prompted me to write further about these concepts.

The old 'new normal' precious metals smackdown has made a few appearances since the Cyprus debacle started but this morning's drop is impressive (given the lack of movement elsewhere) as gold drops back below pre-Cyprus levels. There is one 'currency' that is surgung in value though - Bitcoin is now trading at $107.36, up from $46 pre-Cyprus...

"Soon, whether via Bitcoin or whatever comes next, it will be possible to strip banking away from bankers, and money away from governments." From a recent article in the Spectator titled “How Bitcoin Could Destroy the State”. Support for Bitcoin amongst Austrian economists is growing by they day and in this interview, the highly admired and respected Tom Woods, discusses Bitcoin with Erik Voorhees of Bitinstant (a popular, rapid way of converting fiat into BTC).  This interview very poignantly addresses many of the layperson’s concerns about it that I have heard over the past several months.  Remember, despite the price rise, Ben Bernanke is still creating the equivalent of 75 Bitcoin markets every month with his money printing.

From a January 2nd price of $13.16, the price of a Bitcoin in USD had risen to $46 on March 16th - right before the Cyprus 'solution' was announced. Since then, in two short weeks, the price of a Bitcoin has more than doubled, reaching $101 today. This 'exuberance' in non-fiat currency, should perhaps warrant caution as we noted here, the US is now not only actively monitoring but has commenced regulating the Bitcoin market and those who participate should be well aware that when uncle Sam is involved, things tend to have an unhappy ending.

It begins here: Introduction of cold, hard evidence of bank shenanigans (with complete documentation) that A) should be prosecuted & B) cause enough concern to make you worry about your bank's integrity. 

One of the prevailing false conventional wisdoms about the Cypriot cash confiscation is that it primarily affected rich, tax-evading individuals of Russian origin. Alas, those same individuals are likely to have been least affected, as subsequent discoveries of capital control breaches by the "richest and best connected" reveal, while increasingly it appears that the uninsured depositors on whose back the nation of Cyprus was bailed out are small and medium corporations, who had been parking cash for net working capital purposes with Cyprus' banks, cash which is now gone forever to feed the creeping insolvent Euro-monster, and which can't be used to fund such day to day business activities as payroll, purchases, and business operations. Such as this one.

While Friday's 'hope' triggered some selling pressure in Bitcoin (in EUR), it appears the dismal reality of Europe's new normal has spurred a 'great rotation' as BTC just hit EUR60 for the first time ever...(from EUR36 before the initial Cyprus news last week).

There are no regulated financial markets open today; no BIS-buffered FX market, no Fed-spoon-fed US equity market, no BoJ-jawboned Nikkei 225, and no ECB-sponsored Spanish bond market to judge today's news and rumors. But there is one 'market' open - a market that prices in the belief (or lack thereof) in the status quo to a lesser or greater extent. Illiquid as it may be, today's Bitcoin prices (and volume) says a lot about the headlines of the day...

While depositors in Europe are having their money confiscated outright by their less than friendly governments and despotic, tyrannical politicians who will do everything in the name of "equality, fraternity and of course liberty" or, said otherwise, preserving their careers and the status quo while throwing their taxpayers and voters into the firepit of Keynesian and monetarist idiocy, in the US a different form of capital control may be taking shape. NBC reports from Rhode Island, where a local restaurant chain is now demanding that any clients paying with $100 bills also provide their name, phone number, and drivers' license. By doing this - supposedly in the name of avoiding counterfeiting but don't you dare mention fake bill spotting markets or UV light - it eliminates the only upside that paper money had over electronic transactions: anonymity. How soon before all other retailers and vendors decide that it is a good idea to demand their clients' personal info, for the sake of avoiding counterfeiting of course, first in all $100 bill transactions, then $50, then $20, and so on?

Last November, in an act of sheer monetary desperation, the ECB issued an exhaustive, and quite ridiculous, pamphlet titled "Virtual Currency Schemes" in which it mocked and warned about the "ponziness" of such electronic currencies as BitCoin. Why a central bank would stoop so "low" to even acknowledge what no "self-respecting" (sic) PhD-clad economist would even discuss, drunk and slurring, at cocktail parties, remains a mystery to this day. However, that it did so over fears the official artificial currency of the insolvent continent, the EUR, may be becoming even more "ponzi" than the BitCoins the ECB was warning about, was clear to everyone involved who saw right through the cheap propaganda attempt. Feel free to ask any Cypriot if they would now rather have their money in locked up Euros, or in "ponzi" yet freely transferable, unregulated BitCoins.  And while precious metals have been subject to price manipulation by the legacy establishment, even if ultimately the actual physical currency equivalent asset, its "value" naively expressed in some paper currency, may be in the possession of the beholder, to date no price suppression or regulation schemes of virtual currencies existed. At least until now: it appears that the ever-benevolent, and always knowing what is "in your best interest" Big Brother has decided to finally take a long, hard look at what is going on in the world of BitCoin... and promptly crush it.