As BitCoin Touches $400 The Senate Starts Seeking Answers... As Does The Fed

Tyler Durden's picture

Moments ago BitCoin hit $395, and will likely cross $400 in the immediate future (the chart looks a little less scary in log scale).

So as more and more pile into the electronic currency, some due to ideological reasons, some simply to chase momentum, some out of disappointment with the manipulated gold price looking to park their savings in an alternative, non-fiat based currency, which a year ago traded 40 times lower, the attention of the government is finally starting to shift to what has been the best performing asset class in the past year, outperforming even the infamous Caracas stock market.

Which means one thing: Congressional hearings.

From Bloomberg:

The U.S. Senate Committee on Homeland Security and Governmental Affairs will meet on Nov. 18 “to explore potential promises and risks related to virtual currency for the federal government and society at large,” it said in a statement today.

 

The hearing, titled “Beyond Silk Road: Potential Risks, Threats, and Promises of Virtual Currencies,” will invite witnesses to testify about the challenges facing law enforcement and regulatory agencies, and include views from “non-governmental entities who can discuss the promises of virtual currency for the American and global economies.”

 

“Bitcoin is obviously getting a lot of attention from the federal
government on the regulatory side,” Nicholas Colas, an analyst at ConvergEx Group, said in an interview. “Given the involvement of the currency in illegal activities, that is entirely warranted. I expect these hearings to be largely informational, which is good for Bitcoin.”

 

“The architecture of the system is elegant from a computer-science perspective, but hard for a non-tech person to understand,” Colas said. “Getting industry professionals to close this gap will be very helpful.”

Or not. Because the only thing the government does when its interest is piqued by something, anything, especially things that have to be looked in log-scale, is to promptly regulate it and then tax it, not necessarily in that order. Just how it will achieve this with Bitcoin remains unclear but one thing is certain: it will try.

Especially, now that even the Fed is looking at BitCoin when a few days ago the Chicago Fed issued 'Bitcoin: A primer" in which the Fed states quite simply:

So far, the uses of bitcoin as a medium of exchange appear limited, particularly if one excludes illegal activities. It has been used as a means to transfer funds outside of traditional and regulated channels and, presumably, as a speculative investment opportunity. People bet on bitcoin because it may develop into a full-fledged currency. Some of bitcoin’s features make it less convenient than existing currencies and payment systems, particularly for those who have no strong desire to avoid them in the first place. Nor does it truly embody what Hayek and others in the “Austrian School of Economics” proposed. Should bitcoin become widely accepted, it is unlikely that it will remain free of government intervention, if only because the governance of the bitcoin code and network is opaque and vulnerable.

Finally, while the Fed may be late to the game, the ECB has already made its feelings on BitCoin well-known long ago: recall from over a year ago: "The ECB Explains What A Ponzi Scheme Is; Awkward Silence Follows" in which the European central banks didn't mince its words: BitCoin is nothing but a ponzi scheme to the central bank tasked with preserving the viability of an entire insolvent continent, and a a currency which unlike BitCoin would never survive absent regulatory intervention.

So while the electronic currency is soaring exponentially as it goes through its appreciation golden age, will the one thing that can finally end the dream of BitCoin holders arrive soon: when the government, and existing monetary authorities, start taking it seriously.

Full Chicago Fed paper on BitCoin

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jaap's picture

blow off top...

nope-1004's picture

Anything in competition to the USD, or even nations seeking to settle in something other than USD, are terrorists and labeled humanitarian violators.  Gold, silver, Bitcoin.... will all be managed by the war mongers.

I'd just simply prefer to hold it in my hand, on the butt end side of my shotgun.....

 

hedgeless_horseman's picture

 

 

The Bitcoin of the Berkshires
November 8, 2013
A hyper-local currency is boosting small business trade and bringing neighbors together in Western Massachusetts.

 

http://america.aljazeera.com/watch/shows/live-news/2013/11/the-bitcoin-o...

What will The Federal Reserve Banks, and their lapdog federal politicians, do when more people start using a local currency like the hippies terrorists in Western Massachussets?

The two main purposes of the Federal Reserve Act of 1913 are: 1) eliminate competition, and 2) guarantee profits for the big (federal) banks.

SilverIsKing's picture

I can't wait until the price of one Bitcoin surpasses the price of a one ounce gold coin. It could happen but I still think the Bitcoin will go the way of the pet rock eventually.

hmmmstrange's picture

I still can't believe that it's surpassed a pound of silver.

sleigher's picture

You all know that silk road 2.0 has launched. I am not saying that has anything to do with what is happening, but...  you can't kill an idea and all that jazz... 

Silver Bully's picture

'you can't kill an idea and all that jazz...'

Pshaw. You can co-opt it, and then steer it where you will. If it is in a digital form, on a computer, and it can and WILL eventually be cracked and controlled. It is not a question of if, only when.

 

hmmmstrange's picture

It takes more energy then what is contained in the mass of the sun to "crack" bitcoin. If only we had a few billion suns worth of energy........

wintermute's picture

Tyler, there is no capital "c".

Also, please post a bitcoin address so I can give you guys a donation. ZH has been my No.1 news source for several years.

Interesting sidenote. What date was ZH founded and published its first article? Answer, almost same day Bitcoin was launched. Good omen!

 

gold-is-not-dead's picture

In a year from now, we'll see headlines like "as bitcoin approaches 400k senat demands another look at it".

fonestar's picture

Rally around our new currency and our hero Satoshi!  This is the strategy as was relayed to me....  use the power of virtualization (Bitcoin) to induce panic into global fiat currencies.  Stand on the other side as well holding physical assets.  This is how we fight our enemy, the nemesis of freedom, liberty and God using both virtualization and real, physical assets.

If you stand on the side of corrupt crony-capitalism and genocide by all means hold your Federal Reserve Notes tight.  May you choke on them and die a meaningless death.

If you stand for liberty, freedom and justice for all rally around the mighty Bitcoin.  Watch as we take one battle after another.  Some chose to make their mark in this world by grabbing a gun and killing some peon in an airport.  Meaningless!  We can do better and defund the entire war machine! 

I remember watching as the talking heads would gloat back in 2002 during "shock and awe" as thousands of innocent civilians were massacred using "smart bombs" (most of whom did not support Hussein).  I remember asking myself if there was any justice in this world for these tyrants?

We have these bastards on the run!  No surrender and no retreat!  Bitcoin to $1,000, Bitcoin to $10,000, Bitcoin to $1,000,000 and Bitcoin until we break them and put them on trial!

mjcOH1's picture

"Moments ago BitCoin hit $395, and will likely cross $400 in the immediate future (the chart looks a little less scary in log scale)."

 

Not to worry....bytes 17-34 of each bitcoin signature says it is redeemable in a fixed quantity of gold, 1 gal of oil (courtesy of the US/Saudi mutual self-defense and extortion treaty), or 1 oz of low-radiation flounder.

It is definitely neither a ponzi sheme nor currency with no intrinsic value.

knukles's picture

They'll tax and regulate it...
And do note that the committee looking into this has Homeland Security in its name.

They'll just find out who owns them and send aforementioned Happy as BitClams in Bytes off to Freedom Rings Eternal Elation Camp #13

Sat what you will, but once this becomes the province of UKnoWho, it's gonna end badly.

This cannot be allowed to persist, a threat to fiat oligarchy neither controlled taxed or manipulated.

fonestar's picture

ooooh!  This big scary gubbmint gonna get me!  I am quaking in my boots!

57-71's picture

Well definately the Fearless Leader will want bitcoiners to pay capital gains.

Just pay the bastards virtually and we are all good!

I don't see a good outcome for bitcoin once the govs become involved - unless the committeee can be granted  options at a great price - wink wink, nod nod, say no more, say no more.

fonestar's picture

If you honestly can't figure out to hide any "gains" you have made in Bitcoin from the tax man I can't help you.

Rock On Roger's picture

I admire your enthusiasm fs, your goals are outstanding but I think the platform you are using to achieve those goals will not work. I hope you aren't all in. This money seems very volatile on a Saturday evening, going up and down like a yo-yo. I think I will continue to save my profits in something I can touch.

 

Stack On

fonestar's picture

Well I am definitely not "all in" on Bitcoin and as I stated above I only view it as part of my portfolio.  It may be the first crypto-currency on Earth but I do not know yet if it is the one that survives.  What I do know is that Bitcoin is the most revolutionary and advanced currency in human history.

 

markmotive's picture

Can I pay my taxes with Bitcoin?

Everything you know about money is wrong.

http://www.planbeconomics.com/2013/10/everything-you-know-about-money-is...

Running On Bingo Fuel's picture

Hey
fonestar,
how's
the
weather
in
tel aviv?

GetZeeGold's picture

 

 

 

 

Bitcoins, the new Bre-X.

Manthong's picture

"risks related to virtual currency for the federal government and society at large,”

Aha!  This is the new terrorism.

War on poverty.. war on crime.. war on drugs..  war on terror..  war on virtual currency.. 

War!  ....it's a good thing..   things must be killed in order to save things.

 

oo.. any body see were I left my last dose of soma.

Manthong's picture

"money is a medium of exchange"

YOU FREAKING FED IDIOTS..

ok.. so no longer a store of value, but infinitely divisible.

take your USD and stick it.

(oh.. and back in 1910 JP Morgan said something to you fed fools about money and credit.. look it up.)  

Manthong's picture

As an older person, I am returning to the basics..

Non-GMo and Organic foods.. the garden..  the local church..

..that having been said, I have to be  returning to my  Auto-CAD on the 8 core  AMD with 64 GB RAM and 20 TB BU so as to model the little steel 3D deposition project I am working on.  

Manthong's picture

.. so as i was clipping the grasses from the east side of the deck facing the golf course, i was wondering..

should I plant a few new perennials or image and upgrade the 512 GB boot SSD to 1Tb... ?]\

oh.. and FU Bernanoyellen and your fiat scam which has marginalized my attempts to store value in the near term.

butt.. surprise.. surprise .. surprise...   I have as much staying power as you.

Things that go bump's picture

I refuse to try to save in fiat. Screw that. I saw what happened to my grandparents' and parents' savings so I drained my 401B and sold my house. I drained my bank account shortly thereafter and bought small, valuable stuff that has more than doubled in value since then. I saw my grandparent's and parent's savings dwindle to next to valueless over the past 50 years. My 82-year-old mother is concerned that there won't be anything left to leave my sisters and me when she dies, but I told her that was the point and inflation was engineered deliberately in part to accomplish just that. My grandparents were small business owners and well-to-do by '50s standards. They had what was considerabled a respectable amount put by, but there was barely enough left to bury her by the time my grandmother died and she was only in the nursing home for a few months.   

Lore's picture

"Small, valuable stuff" <-- Jewels?  Baseball cards?  PMs?

It is hard to see how Bitcoin can avoid being targeted by increasingly hungry and control-freakish governments, not to mention ISPs and other vested interests. The problem with artificial scarcity is that it's artificial: the same types who manipulate energy supply and old money will jump all over this. It's a psychopath's dream.  "Now you have it; now you don't."

RSloane's picture

You're right, Knukles. Any investigative body with the words "homeland security" in its name means be prepared to be seperated by whatever item you have chosen to invest in other that fiat currency. Wall Street....I mean Washington DC, will have its cut if not all of it.

Running On Bingo Fuel's picture

"Place your hand on the biometric reader! Now show me your papers."

Over.

RSloane's picture

Could you imagine the shitstorm in the US if bitcoin ATMs were set up here as they were in Canada? The police in full riot gear would be right there to 'protect our freedoms".

fonzannoon's picture

Good Morning RSloane. This remains the reason I am watching bitcoin from the sidelines. I will believe it is the real deal when Uncle Sam declares all out war on it and starts throwing people in jail. As long as it is a cool crypto currency for the millenials I am uninterested. The day those millenials are labeled terrorists and get in the cross hairs of every agency of every country, I will warm up to it being the real deal.

RSloane's picture

Good morning Fonz. Happy Sunday. I think what alarms the gov't the most is that the existence of bitcoins is a clear signal that people have little faith in their manufactured and debased currency. For the very same reason, downward pressure on precious metals will continue. I agree with you though, people are going to fall into the crosshairs and be branded as traitors, or terrorists, or whatever the perjorative du jour is. In the meantime, our cousins to our North now have bitcoin ATMs. Of course our government may "allow" their existence for the purposes of taxing the hell out of them.

Running On Bingo Fuel's picture

.gov is going to love bitcoin. It's a historical record of all commerce. A tax collects wet dream. No blackmarkets or the FBI takes your bitcoins.

Over.

fonestar's picture

WTF are you talking about?  The blockchain DOES need a historical record in order to function.  Theses addresses in it are not tied to specific individuals.

ed31337's picture

With government survelliance of the Internet, don't you suppose that the addresses ARE tied to relatively specific individuals? I mean, seriously, as soon as you submit a transaction or even look at your balance from IP address X, the gov't knows that transaction was belonging to IP adddress X (maybe even MAC address), and then they just look at email logs or ISP records until they know who was at IP address X at that time.

Unless you do all of your Bitcoin operations under a public Internet access point (the public library, public WiFi hotspots in stores, etc) with lots of other people doing their own Bitcoin operations and NEVER at home, the gov't is watching and already knows what you've got regarding Bitcoin. 

fonzannoon's picture

I have a lot to learn. I thought the big advantage (other than limited supply) of bitcoin was that business could be conducted outside the grasp of the IRS. I need to do more homework.

Check this out.

http://nypost.com/2013/11/10/mayhem-at-bryant-park-innocent-teen-struck-by-gunfire

Why be rich in NYC metro anymore? Go to the mall, get shot at, go ice skating in Bryant Park, get shot at. Cruise up the west side in your range rover on a sunday afternoon........

and they just got Diblasio. The city is toast.

Hey I had asked you a question the other day re: equities. not sure if you saw it. I had a thought for you that I can't get into on here. If you are interested send me an email at fonzyfonzanoon@yaho.com

Have a good day, my daughter is up, time to get movin.

Running On Bingo Fuel's picture

It's NOT a limited supply.
.
.
.See->
http://www.zerohedge.com/news/2013-11-09/chris-martenson-warns-there-not...

Like USD's you can print bitcoin to infinity.

tvdog's picture

No, you can't print unlimited bitcoins. The algorithm sets the rate of increase in bitcoins at 10% per year, regardless of the number of miners.

Running On Bingo Fuel's picture

It's exponential.
10% of a hundred is what?
10% of a million is what?
10% of a trillion is what?
10% of a trillion-trillion is what?

RSloane's picture

I'll be emailing you either later today or tomorrow. My family is now up as well and we have a busy day planned. Have a good one, Fonz.

PathForward's picture

Bitcoins effectively provide a means to transfer relative value during financial transactions – BTC can serve as currency. But to invest value in BTC for long periods of time may be risky. Crypto-currencies (CC’s) are an upcoming wave for mankind and will serve an important role in freeing society from excessive government control, but I believe CC’s will serve fundamentally as a transaction medium, not as a store of value. In other words, as technology changes continuously over time, so too will CC’s, and therefore some CC’s will rise in relative value while others are falling. The bigger-picture objective will be for citizens to keep their savings invested in entities that have a long-term history of holding value (or growth in value). If you trade value for CC’s and hold onto the CC’s for long term, you’re simply speculating.

Right now, Bitcoins are traded relative to U.S. Dollars and other fiats, and people evaluate BTC value relative to U.S. Dollars. Someday, BTC and other CC’s will be traded relative to other benchmarks – you can count on that. For now, however, there remains a fundamental problem when Bitcoins are tradable for USD’s, and here it is in a nutshell: The fact that USD’s may be created out of thin air and traded for BTC’s, means that the entity creating USD’s may unduly influence the value of BTC. If I were the Fed, and I wanted to destroy confidence in BTC, I would simply trade USD’s for BTC in an erratic manner. I’d buy BTC steadily for a period of time, thereby purposely creating a parabolic ramp upwards, and then sell them suddenly, thereby slamming the price downward dramatically. As long as people are willing to actively trade BTC for USD, the Fed could continue that process for as long as desired, thereby wreaking havoc with confidence in BTC. In order to be widely used and accepted, BTC needs to stabilize, and the Fed probably won't allow that. Yes, the Fed must be willing to lose USD’s overall in that scheme, but that’s trivial since the overall cost of the manipulation is relatively low and the Fed may create USD’s with simple keystrokes on a computer.

Someday, when the USD fails and is replaced by another benchmark (e.g., gold), the manipulation of BTC value will be much more difficult/costly. In other words, the manipulators will need to trade gold for BTC, and that will be a game changer.

hedgeless_horseman's picture

 

 

...people evaluate BTC value relative to U.S. Dollars.

 

 

I’d buy BTC steadily for a period of time, thereby purposely creating a
parabolic ramp upwards, and then sell them suddenly, thereby slamming
the price downward dramatically. As long as people are willing to
actively trade BTC for USD, the Fed could continue that process for as
long as desired, thereby wreaking havoc with confidence in BTC.

BINGO.

digi's picture

And each time it raises more awareness and BTC rises to a new all time high from the previous pump and dump. Gee, sounds like that strategy works about as well as QE. Do something that helps you in the short term and hurts you long term.

fonzannoon's picture

It's interesting how easy it is to subsitute gold for bitcoin in HH's italics.

RSloane's picture

Gold, the value of a home, land.....anything can and will be manipulated.

malikai's picture

That would be the most awesome game in town.

TheHound73's picture

Sell to the Fed exepensive coins then buy them back cheap.  Cool.