Chart Of The Day: Is The ECB Responsible For The Second Coming Of BitCoin?

Tyler Durden's picture




 

That precious metals are not the best friends of central banks, whose sole provenance is in creating, and lately massively diluting, faith-based fiat currency is no secret, especially not after the recent snafu involving the Bundesbank and its shocking gold repatriation announcement which came in direct refutation of its public statements just 2 months earlier about faith in the NY Fed this, and bashing of a "phantom debate" on the safety of gold reserves that. Yet it was not gold gold, silver or even tungsten that was the object of derision in an amusing paper released by the ECB in early November titled "Virtual Currency Schemes", which we profiled at the time, but rather the decentralized electronic currency BitCoin, which was supposed to highlight what, in the eyes of the Draghi-led Frankfurt institutions, is nothing but a Ponzi scheme.

Why the ECB suddenly felt threatened so much by Bitcoin, it felt an imperative to issue a 55 page paper decrying such electronic currencies we will never know. What we do know, however, courtesy of a reminder by Bloomberg's Max Raskin, is that since the publication of said paper, the value of Bitcoin as tracked by the Mtgox exchange, has soared some 40% in just under three months, from a "fiat equivalent value" of $13 to a most recent closing price of $18.50, and has doubled in the past 12 months alone.

So one wonders: after soaring to an all time high of $30 before crashing concurrent with the epic May 1, 2011 takedown of silver, was none other than the European Central Bank responsible for the recent second coming of BitCoin which is now slowly but surely creeping back to its all time highs, and what happens to all alternative "virtual" currencies once BitCoin returns to all time highs: will the Fed, the ECB, and the BIS have their hands full with pushing gold lower to care too much about this electronic currency, or will their attention then be diverted away from the daily precious metals smackdown to focus on this threat that at least in Europe is so large, the ECB itself had to chime in?

More from Bloomberg:

The CHART OF THE DAY shows that bitcoin has more than doubled in the past 12 months, strengthening to $16.37 from $5.88, according to data from Mt. Gox, the world’s largest bitcoin exchange. The money, issued by a decentralized network of computers, has recovered after falling to $2.14 in November 2011 from a high of $29.58 five months earlier.

 

Greater demand for virtual currencies could have a negative impact on the reputation of central banks, according to a report published by the European Central Bank in October last year. Since the report was released, bitcoin has risen more than 55 percent against the dollar and use of the currency has surged.

 

Bitpay Inc., a bitcoin payment processing company that recently raised $510,000 in an investment round, this month announced that the number of companies using its services has increased almost 50 percent to more than 2,000 since November, when blog management firm WordPress.com said it would accept the digital currency.

 

I think the ECB obviously is concerned, and it’s not reputational,” said Steve Hanke, a professor at Johns Hopkins University in Baltimore who helped to establish new currency regimes in countries such as Argentina and Bulgaria. “I think it’s a competitive threat. Maybe virtual currencies will be so convenient that they will pose a threat because of their ease of use.”

And as a reminder, for pure comedy value, here is the ECB, again, defining what a Ponzi scheme is without referencing itself even once:

A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier-stage investors and to use for personal expenses, instead of engaging in any legitimate investment activity

Listen to the ECB: if nothing, it certainly is an expert on the topic of Ponzi schemes.

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Mon, 01/28/2013 - 16:17 | 3192416 buzzsaw99
buzzsaw99's picture

a generational bottom bitchez [/sarc.]

Mon, 01/28/2013 - 16:21 | 3192429 Future Tense
Future Tense's picture

Robert Prechter over at Elliott Wave called the start in this bitcoin market before anyone. As the debt markets begin to implode across the world, more and more people are going to begin using alternative currencies. The following is an excellent walk through of the coming bond bubble implosion:

http://www.ftense.com/2013/01/2013-outlook-part-1-introduction.html

Mon, 01/28/2013 - 16:26 | 3192453 MillionDollarBonus_
MillionDollarBonus_'s picture

WARNING: Bitcoin is a SCAM. Bitcoin is an idiotic experiment which proves that a non-centrally planned currency is simply unfeasible. Bitcoin is highly corruptible as it is 100% computerized, unregulated and unmanaged. What if somebody cracks the code to your wallet? What if the code breaks? Libertardians never consider intricate details like this because they are too simplistic. The libertarian dream of perfectly functioning ‘free markets’ is a ridiculous fantasy. The only way to ensure peace and happiness is to delegate responsibility to democratically elected politicians with the skills, experience and education to manage complex social and economic issues.

Mon, 01/28/2013 - 16:34 | 3192488 EscapeKey
EscapeKey's picture

Much better with a strongly regulated system, such as the one gently guided by the SEC and CFTC.

Mon, 01/28/2013 - 17:05 | 3192595 Manthong
Manthong's picture

“100% computerized, unregulated and unmanaged”.

They need someone like Bart Chilton looking into things.

Mon, 01/28/2013 - 17:59 | 3192745 Poor Grogman
Poor Grogman's picture

MDB for president...

Mon, 01/28/2013 - 20:21 | 3193178 Jack Napier
Jack Napier's picture

@MillionDollarTrollBus

BitCoin is not un-regulated. It is a-regulated. "a" means "not" in Latin in case you were wondering. I know this may seem confusing, but it's along the lines of immoral vs. amoral. Corporations are amoral. They can't be good or bad, although immoral human beings will use that to their advantage.

There is no need to regulate or manage something that can't be regulated or managed. The protocol has a predictable and publicly available algorithm for deflation built in for stability purposes.

I realize that I shouldn't feed you, and that you know all of this, but for the sake of the AI out there I don't want them to be mislead.

Mon, 01/28/2013 - 20:23 | 3193192 Half_A_Billion_...
Half_A_Billion_Hollow_Points's picture
To the peoples of ZeroHedgeTown:
  • BITCOIN is a landgrab, ECB report or not, it will grow to unbelievable highs.
  • if 1000 people want to buy all this year's production of bitcoin, all of it, they will only have 1,314 bitcoin.
  • 21M bitcoin divided by 5B above ground oz of gold = 238 ounces of gold per bitcoin (Scarcity way higher than gold)
  • Each bitcoin is divisible to 100,000,000 satoshi cents
  • There are TWO LAYERS of cryptography, both of which are unbreakable:  The public address AND the hash of the public address.  There is no energy in the universe to break these codes.
  • You can cross borders with whatever amount you want, nobody knows.
  • You can create a "Brainwallet", something only you know, and DELETE all bitcoin software from your machine, and they'll be safe.  As long as you remember your "Brainwallet".  
  • For each new Bitcoin created, the Fed alone is printing new $800,000.00, and given the currency wars, everyone is on the printing boat full speed ahead.
  • The Japanese are mostly savers; the biggest exchange is in Japan, Kyle Bass is warning us that Japan will suffer from chronic inflation, the Japanese do NOT like inflationary currencies.  Do the math.
  • The Germans in Berlin accept bitcoin in bars, restaurants, and whatever else you can think of.
  • Bitcoin competes with off-shore accounts, numbered swiss accounts, gold & silver, HSBC money laundering, etc.
  • Gold can be Corzined by a tyrant-with-a-kill-list; bitcoin can't.
  • Bitcoin is about TRUSTING NOBODY.  NO ONE SHOULD BE TRUSTED.  The source code is there in the open.
  • Bitcoin is by far the strongest currency in the globe, not subject to the whims of these cocksucking communists.
  • Bitcoin is THE ONLY HONEST INTERNATIONAL BANKING SYSTEM we have today.

 

Best of luck in your future endeavors.

Mon, 01/28/2013 - 20:36 | 3193217 Jack Napier
Jack Napier's picture

Sure, until ByteCoin or MegaCoin come out with a superior algorithm. Then everybody will be scrambling to sell their BitCoins for the next big wave.

I like BitCoin infinitely better than fiat currency from a fundamental standpoint, but if you don't have electricity and Internet access you can't use it.

Maybe one day in the future there will be enough competing electronic currencies that a baseline will be achievable, but things are still in their relative infancy.

Another thing to bear in mind is that digital currency opens the door for RFID implant enabled banking. This could happen with digital fiat just as easily as with BitCoin though.

Gold and silver are what you will need when faith in paper is lost, and will be the only way out of the Tron mainframe.

Mon, 01/28/2013 - 20:58 | 3193308 JimRogers
JimRogers's picture

The block chain has split, and created competing crypto currencies. 

This is a built in feature of the bitcoin network, which allows itself to be amended via democractic, cryptographic votes.

 

Mon, 01/28/2013 - 21:07 | 3193329 Half_A_Billion_...
Half_A_Billion_Hollow_Points's picture

First, study.  Then, comment.  Ok?  

 

There are lots of "alt coins", "alt chains", "scamcoins" out there.  Nobody gives a flying fuck and everyone stays with bitcoin.  Google "network effect".

But I'll tell you one thing: IF YOU DO SOMETHING THAT'S BETTER THAN BITCOIN IN CRUCIAL ASPECTS, I WILL BUY IT. I won't sell any bitcoin, but I'll put ten grand in your idea.  If you can preserve the properties of bitcoin and enhance something that nobody has thought of, I WILL BUY IT, because you have a genius idea in your hands and I want some part of that.

Mon, 01/28/2013 - 21:26 | 3193372 Dave Thomas
Dave Thomas's picture

I think what he was saying was that the alt coins/chains must prove viability, sort of like a darwinian principle of sound monies, only the strong survive. That being said I can't wait till I purchase my first 400' Yacht when my Butterfly ASIC arrives! ( TEE HEE )

Tue, 01/29/2013 - 03:00 | 3194149 thisandthat
thisandthat's picture

Yes, the one thing that can crash the bitcoin market is a breakthrough in mining algorithms/hardware.

Tue, 01/29/2013 - 20:59 | 3197121 labestiol
labestiol's picture

Nope, the bitcoin protocol is made to self-adjust to increased computational power, so that the issuance of bitcoin will always follow this serie.

In fact such breakthoughs already happened, people first used CPUs, then GPUs, then FPGAs, and soon ASICs should come. It'll not disturb the issuance, just increase the security.

Mon, 01/28/2013 - 22:12 | 3193479 wee-weed up
wee-weed up's picture

Half_A_Billion_...

Uhhh... don't forget, that "Google network effect" used to be...

a "Yahoo network effect"... and before that... an "Altavista network effect."

The only SURE thing in life is change!

Tue, 01/29/2013 - 00:41 | 3193949 MeelionDollerBogus
MeelionDollerBogus's picture

It's called gold 'n' silver, bitchez.

My own GPG signature backed by my own gold and silver coins and bars known to those I associate with who also have assets of similar value is of higher value than any bitcoin. Even higher value is me in person holding such a coin or bar for trade on the spot.

Mon, 01/28/2013 - 16:36 | 3192494 MarcusLCrassus
MarcusLCrassus's picture

Well known shill MDB is against it. 

That means it must be good. 

Mon, 01/28/2013 - 17:52 | 3192718 SamAdams
SamAdams's picture

What is the definition of satire?

Mon, 01/28/2013 - 16:39 | 3192510 hazek
hazek's picture

Yeah people!!!11 An open source project that anyone can see exactly how it works and what it does that isn't controled by anyone is a SCAM! Just keep using your fiat money, it served us well so far!!11 And don't even dare to think about buying gold or silver...

 

 

/rolleyes

Mon, 01/28/2013 - 17:38 | 3192694 Temporalist
Temporalist's picture

Hazek in case you didn't know MDB is an anti-troll troll.  Take everything posted by him/her as sarc.  MDBs comments are said with eyes rolling.

Mon, 01/28/2013 - 18:51 | 3192921 SilverIsKing
SilverIsKing's picture

MDB is Lenny Bruce, George Carlin, and Eddie Murphy all rolled into one.

Mon, 01/28/2013 - 16:40 | 3192516 LynRobison
LynRobison's picture

With an endorsement like this from MDB, Bitcoin sounds like something to look into! Thanks for your help MDB!

Mon, 01/28/2013 - 19:49 | 3193072 Karlus
Karlus's picture

Consider this: MDB comes out against Bitcoin, people say is sarc and think bitcoin is good...

MDB knows this and in true troll fashion gets people chasing Bitcoin which is bad. The double negative.

Mon, 01/28/2013 - 16:49 | 3192540 TheGermanGuy
TheGermanGuy's picture

Don´t ever downarrow MDB. It proves that you have no sence of irony.

Mon, 01/28/2013 - 18:23 | 3192825 Bob
Bob's picture

Now that's doubling down on irony. 

Mon, 01/28/2013 - 18:02 | 3192752 billsykes
billsykes's picture

Simply put, which no one can answer is "who started this?"

(hint probably the guys that wrote the software- as the single paper about bitcoin authored in fake name, published on a news group didn't talk about the actual math behind this)

I think that everyone wants to believe so badly in something that they overlook actual facts and start wanting it to be true (bitcoin). Lots of people can make stocks go up or down.

 

But if it was revealed that the bitcoin creator was born from a virgin and led people with his teachings then was killed and was magically resurrected (not zombie) then that's a story I would believe.

 

 

Mon, 01/28/2013 - 18:27 | 3192843 JimRogers
JimRogers's picture

Define iron: Anonymous web poster, on an anonymous website, knocking a currency for the author remaining anonymous.

Mon, 01/28/2013 - 18:29 | 3192848 labestiol
labestiol's picture

Best answer would be "Who Cares ?"

This is open-source. Every line of code has been reviewed and understood. Other implementations were made.

We will probably never know who satoshi is (or who the group of people known as satoshi are). Sure thing is he/they did an amazing work.

Mon, 01/28/2013 - 19:15 | 3192977 jayman21
jayman21's picture

Ben is down arrowing again.  Fuck you Ben.  Bitcoin is going to replace that burning feeling you have in your ass from the &^%$ers.

Mon, 01/28/2013 - 20:29 | 3193216 seek
seek's picture

"Satoshi Nakamoto" is japanese for "John Galt."

Mon, 01/28/2013 - 18:28 | 3192847 Meat Hammer
Meat Hammer's picture

Statists will always tell you what they fear.  Thanks, MDB.

Mon, 01/28/2013 - 18:36 | 3192871 osmosis
osmosis's picture

"What if somebody cracks the code to your wallet?"  

Was this not the same argument people used to use for why you should never use your credit card over the internet?

Mon, 01/28/2013 - 19:20 | 3192989 SilverIsKing
SilverIsKing's picture

I have developed  another form of money if anyone is interested.

Everyone, I'd like to introduce ShitCoin

Anyone can produce it and mold it into coin shaped objects.  All one needs to do is eat, wait about 8-10 hours, and voila!!!

Just grab some, flatten it out, and cut into a disc shaped object of any size.  You may want to wait a while before flattening depending upon what you ate.  Once the coin has hardened, you've got a ShitCoin™.

Each ShitCoin has a unique DNA and this makes it one of the most trusted forms of payment by vendors around the world.

I'm selling ShitCoin's if anyone is interested and I will accept US Dollars or any other fiat currency.  $10 US for a 3 lbs bag plus $5 for shipping and handling.

Mon, 01/28/2013 - 20:28 | 3193213 Half_A_Billion_...
Half_A_Billion_Hollow_Points's picture

Lots of people are doing just that.  Google "scamcoin".  Then google "Network effect".  

 

1usd  = 0.05 bitcoin.  

 

Prepare for more zeros.

 

Tue, 01/29/2013 - 00:27 | 3193911 MeelionDollerBogus
MeelionDollerBogus's picture

I'm prepared to see bitcoin valuations hit 0's completely left to right.

Same for Federal Reserve notes.

Gold and silver are money, bitcoin is for suckers & FRN's are for slaves.

Mon, 01/28/2013 - 22:19 | 3193518 Reformed Sheep
Reformed Sheep's picture

$5 for shitting and handling. 

Mon, 01/28/2013 - 20:12 | 3193139 trentusa
trentusa's picture

hey million dollar jackass, the best hackers in the world have tried to hack bitcoin in a open worldwide peer review for several years now, and the best have all tried and failed. Besides, how would a fascist like u know if a free market functions or not since we have never had one in this country? The myth of the darwinianism of a free market only works if inventions such as Tesla's free energy devices were not prevented from reaching the marketplace, & TB2F companies are allowed to fail. The idea of finding peace or happiness by delegating the responsibility to a corrupt politician is unamerican and dumb.

Tue, 01/29/2013 - 00:24 | 3193904 MeelionDollerBogus
MeelionDollerBogus's picture

Jesus fuck, you got sucked in. The best bitcoin hackers set up exchanges, collected tons of bitcoins then traded them out for currency while collapsing the exchange itself because "the exchange was hacked". Idiots.

Mon, 01/28/2013 - 20:57 | 3193310 q99x2
q99x2's picture

MD Bone US, please ask your congress person before speaking.

Tue, 01/29/2013 - 00:20 | 3193889 MeelionDollerBogus
MeelionDollerBogus's picture

Ah, you tricky fucker. Bitcoin is a scam but for none of the reasons you mentioned. NO matter what, always red arrow.

Mon, 01/28/2013 - 20:27 | 3193206 awaken
awaken's picture

Schumpeter's creative destruction is at work....woohoo!!!

 

Competeting currencies from the past to the future:

Gold

Silver

Bitcoin

RIPPLE (Bitcoin 2.0)

http://spectrum.ieee.org/telecom/internet/ripple-credit-system-could-hel...

http://www.americanbanker.com/issues/177_235/disruptor-chris-larsen-retu...

 

Toilet paper of the future:

All fiat currencies

Tue, 01/29/2013 - 04:24 | 3194196 thisandthat
thisandthat's picture

Perfect for con-artists and "social engineers", experts at gaining confidence from unsuspecting parties, specially overconfident patsies (and their trust network).

Tue, 01/29/2013 - 04:33 | 3194200 thisandthat
thisandthat's picture

In fact, it mimics banking system perfectly: a con-artist/"social engineer" (bank) cons a network of trusting patsies (bank customers) into lending them money... and then you're both broke and indebted to cover for the fraud, as we know.

Mon, 01/28/2013 - 16:17 | 3192419 francis_sawyer
francis_sawyer's picture

Bitcoin is actually a money printers best friend...

Mon, 01/28/2013 - 16:21 | 3192434 Cursive
Cursive's picture

@francis_sawyer

Prepare for the bitdefenders!  If it can be created and it can be traded, then it will be manipulated.

Mon, 01/28/2013 - 16:25 | 3192446 JimRogers
JimRogers's picture

Nobody is bailing out bitcoin counterparties, as the counterparties are nebulous at best.

 

Manipulation, now that's just a matter of perspective. 

 

We've already has a 'London Whale' incident w/ Bitcoin. And numerous other blowups. 

Mon, 01/28/2013 - 16:24 | 3192447 francis_sawyer
francis_sawyer's picture

@Cursive

~~~

Oh I'm hunkered down alright [waiting for the assault]... It's just like the religious fanatics out there... 

Mon, 01/28/2013 - 16:25 | 3192452 JimRogers
JimRogers's picture

Provide one contention that bitcoin is a fiat-squirters dream, and I'll do my best to attack it. 

 

You make a sweeping claim, but back it up with no logic, facts, rumors, opinions or anything. 

 

Your not even a strawman.

Mon, 01/28/2013 - 16:37 | 3192460 francis_sawyer
francis_sawyer's picture

Look ~ I'll be clear here... In order for something to WORK in this world, it has to be UNCOMPLICATED... Forget about the technological infrastructure & 'non'-ubiquitous aspects for a moment [in a SO CALLED 'Global Economy']... People simply don't UNDERSTAND IT... [as proof: if an instant poll were to be taken right now ~ more people would probably have FAITH in the MSM or GOVERNMENT than they would to put all their net worth in a Bitcoin basket]...

~~~

Do a little reverse engineering... People don't even fucking understand FIAT PAPER MONEY [as we speak], but they're supposed to understand BITCOIN overnight?... Pffft!

The REASON I say it's a 'money printers best friend' is that if a competing system arises [then falters due to complications, or a myriad of other reasons], then people will RUN AWAY from it faster than they gravitated to it in the first place...

Mon, 01/28/2013 - 16:39 | 3192498 EscapeKey
EscapeKey's picture

Bullshit.

Knowledge is absorbed gradually. Do you really think people grasped the significance of a "piece of paper" over actual gold coins first time they came into existence?

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