It may seem odd, but at a time when every major news source was reporting the end of Bitcoin, I bought my first Bitcoin today using the Coinbase exchange. While I am new to Bitcoin itself, I have been following its community, primarily via /r/Bitcoin, and from the looks of it, this “crash” pales in comparison to previous ones. How I see it is that Mt. Gox needed to die, and now that’s it’s behind us the Bitcoin community can grow even bigger and better. I’ve never trusted that exchange very much, what with all the trading incidents and stories of being unable to withdraw one’s own money. Despite the recent events that stirred commotion in the world of cryptocurrency, I think that this is one of the best times to get started.
First off, assuming the BTC economy will strengthen, one can buy low right now. At the time this post was written, 1 BTC goes for $540.55 to $560 depending one which exchange. As we’ve witnessed in the past, Bitcoin is fully capable of surpassing $1,000. Secondly, and I’m I disappointed with the media for causing confusion about this, the problem lay in the Mt. Gox exchange specifically, and not the currency itself. Just as one may get scammed when using U.S. Dollars or the Euro or any currency, but you cannot get scammed by the currency itself, this was the case with Bitcoin. And with the paranoia of a “Bitcoin Scam,” came attention from the government, one of the very institutions whose lack of presence in this currency as made it so popular.
Senator Joe Manchin (D-W.V.) has actually called for a complete ban on Bitcoin, just like China and Thailand (because of course that’s where we should get our policy from), writing that it is “disruptive to our economy. If one wants to read his complete letter, Business Insider did an article on it. I’d like to use this post to respond.
Here starts out with:
I write today to express my concerns about Bitcoin. This virtual currency is currently unregulated and has allowed users to participate in illicit activity, while also being highly unstable and disruptive to our economy.
Allowed user’s to participate in illicit activity? What does he think people usually buy illegal drugs with and is still used in such transactions today? The dollar! Why don’t we ban that too‽ Any currency can be used to buy anything so long as that vendor is willing to accept it in payment. A currency is a commodity just like any other. And as far as it being “disruptive”, it’s pretty clear just by looking at the Coin’s value that there’s pretty high demand for it, and that any government intervention would be many times more disruptive.
Bitcoin is a crypto-currency that has gained notoriety in recent months due to its rising exchange value and relation to illegal transactions . . . [which has made] Bitcoin attractive to some also attract criminals who are able to disguise their actions from law enforcement. Due to Bitcoin’s anonymity, the virtual market has been extremely susceptible to hackers and scam artists stealing millions from Bitcoins users.”
Once again, this brings us back to the argument for banning the dollar. And it’s plain to see that if people continue to trade BTC despite the “dangers” that it does not pose a sufficient threat enough to discourage its use.
It has been banned in two different countries—Thailand and China [and the European Union has] issued warnings to Bitcoin users as their respective governments consider options for regulating or banning its use entirely. I am most concerned that as Bitcoin is inevitably banned in other countries, Americans will be left holding the bag on a valueless currency.
Why can’t Manchin understand that that is the market’s issue to deal with? And Bitcoin’s ban is nowhere near inevitable. The Swiss Government has proposed treating it like any other foreign currency.
As of December 2013, the Consumer Price Index (CPI) shows 1.3% inflation, while a recent media report indicated Bitcoin CPI has 98% deflation. In other words, spending Bitcoin now will cost you many orders of wealth in the future. This flaw makes Bitcoin’s value to the U.S. economy suspect, if not outright detrimental.
Senator Manchin is correct in asserting that deflation discourages consuming in the present. But what it does do is encourage investment. The alternative to using Bitcoin is using the inflationary dollar. Just as deflation discourages present, consumer spending, inflation encourages it. But when that inflation is caused by a government or bank creating money or credit out of thin air and loaning it, it causes investment in places where there naturally would be no demand, and when the investment percolates down to the consumer, in the form of higher wages and incomes, the malinvestment is exposed and must be liquidated, these liquidations being known as depressions, which need only be fleeting as long as government does not try to keep wages, incomes, prices, and spending at pre-depression levels which, unfortunately, is usually the government’s way of “tackling” depressions. Inflations and deflations in the value of money are sustainable given the right demand, if it is in a free market setting, but this is not the case with the dollar
He goes on to say that is dangerous and we should stop it before it “hurts hard-working Americans.” I don’t know about that; it didn’t seem to hurt people such as Jered Kenna, Charlie Shrem, or Roger Ver. The letter was addressed to various government officials and financial regulators, one of them being the Federal Reserve Chairwoman, Mrs. Janet Yellen. I have to admit that so far I have not been a very big fan of Yellen so far, due to her view on inflation. Nonetheless, I was glad to here yesterday that she responded to Senator Manchin that the Federal Reserve does not have the authority to regulate Bitcoin: “Bitcoin is a payment innovation that’s taking place outside the banking industry. To the best of my knowledge there’s no intersection at all, in any way, between Bitcoin and banks that the Federal Reserve has the ability to supervise and regulate. So the fed doesn’t have authority to supervise or regulate Bitcoin in anyway. One concern with Bitcoin is the potential for money laundering. [FinCen] has indicated their money laundering statutes are adequate to meet enforcement needs. The Fed doesn’t have authority with respect to Bitcoin, but certainly it would be appropriate for Congress to ask questions about what the right legal structure would be for digital currencies. My understanding is Bitcoin doesn’t touch [American] banks.” She finishes that even if they were to try, it would be difficult to regulate, saying, “It’s not so easy to regulate Bitcoin because there’s no central issuer or network operator. This is a decentralized, global [entity].”
So despite what they tell you, this is the best time to start using bitcoins. You can buy low, transaction fees are extremely low, it’s anonymous, allowing you to buy black market goods (and I’d like to point out here that the black market is not inherently evil. There’s the white market, which is the mainstream economy, the black market, which is the underground economy, and the red market, which is the violence-and-theft economy. There are overlaps between them in some cases, but anything black or white, and not red, is completely morally justified in my opinion. Sorry, this was a long parenthetical phrase; and I don’t think your supposed to have multiple sentences inside these), it’s peer-to-peer, so there’s no middleman, and it’s completely decentralized, so there is no central banks controlling it, so no government can control the currency. No more artificial booms followed by very real busts; booms and busts will still exist, only the market will solve its own problems. Let’s get Bitcoin back on track so it can go to the moon!