Wednesday, February 26, 2014

Bitcoins, Stage 2: "Bring in the Feds!"

By Gary North

Reality Check

When you think "Mt. Gox," think "Enron."

When something this devastating happens to the biggest exchange in an experiment designed by anonymous Japanese programmers, the industry is not going to recover rapidly. Other firms in this industry now have a real marketing problem.

The disappearance of the Mt. Gox bitcoins exchange is a major setback for the future of bitcoins. It will keep out serious money until the industry is regulated by major governments. The move toward regulation has already begun. This will accelerate it.

Representatives of surviving bitcoins firms assure us that this is just a minor setback. But it is not a minor setback. When the biggest bitcoins exchange in the world goes belly-up, and it takes an estimated $409 million worth of investors' funds with it, the market cannot attract new investors easily. The sheep have now seen what can happen to them. The official assurances from rival firms do not deal with this fear: "It can happen again. Investors will be left with nothing." How can the survivors prove this is wrong? No one even knows what happened. There is o recourse. It was all private. It was all based on trust. Those who trusted some kid have lost their money.

From day one, bitcoins were sold to libertarian investors on the basis that they are unregulated. This, we were assured by promoters, would make bitcoins into worldwide libertarian money. Now, the "new, improved" bitcoins will be regulated by the Securities and Exchange Commission and the Federal Reserve. Faith must be restored in bitcoins. The solution? Bring in the Feds!


6 comments:

  1. I'm starting a new betting pool website to predict when Wenzel throws in the towel on Bitcoin and admits defeat. Any takers? The website is www dot reallybutthurtBitcoinisntcollapsing dot com.

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  2. I like Gary, but from this article, I don't think he has done much research on bitcoin.

    "The disappearance of the Mt Gox bitcoins exchange is a major setback for the future of bitcoins. It will keep out serious money until the industry is regulated by major governments. "

    False. There is a lot of money going into bitcoin businesses right now. Do a google search for 'bitcoin raises' and you'll find plenty of stories, such as "Coinbase raises $25m"

    "No one even knows what happened."

    False. Gary doesn't know what happened. Mt Gox stands for 'Magic The Gathering Online Exchange.' It was not built to be a public bitcoin exchange. It was not built to be scalable. This is what happens with literally all brand new tech products -- they're a built one way when small, then acquired and rebuilt to scale. Gox hasn't been rebuilt to scale because of horrible management. That management then began to steal the coins from their users. It's not a breach of the bitcoin protocol. It is a bank opening up deposit boxes and taking money.

    "From day one, bitcoins were sold to libertarian investors on the basis that they are unregulated. This, we were assured by promoters, would make bitcoins into worldwide libertarian money. Now, the "new, improved" bitcoins will be regulated by the Securities and Exchange Commission and the Federal Reserve. Faith must be restored in bitcoins."

    Because the Feds want to be involved in bitcoin is not any indictment of bitcoin and it's silly to suggest so.

    Gary North then goes into giving the Winklevoss Twins some marketing advice. Completely unrelated to bitcoin.

    "Nobody understood the whole bitcoins thing from the beginning. "

    False. Gary doesn't understand "the whole bitcoins" thing from the beginning. Bitcoin is both singular and plural. Another indication that Gary is not well-versed in bitcoin.

    The rest of the article talks about countering faith in the currency. All reasonable arguments. However, he needs to get his facts straight from the get-go to have any credible opinion on this topic.


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    Replies
    1. You have refuted none of Gary North's points. And if the govt. takes over bitcoin (or any virtual currency) they will elasticize it, they will do as they have done with their sanctioned fiat currencies. Yet as Mr. North points out, the players in the space right now such as SecondMarket, Circle, Bitpay, are cozying up to regulators, and pols, they too want to be the select blessed ones not unlike Goldman-JP-BofA-Wells, etc. But in your world nothing wrong with this.

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    2. "if the govt. takes over bitcoin"

      What does this even mean? It's one thing to say that the government will clamp down on bitcoin where it interfaces with the legacy banking system, but it doesn't make any sense to speak of the government taking over the bitcoin protocol itself; it's not even theoretically possible.

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  3. The Internet is littered hip deep with the bones of failed startups.

    Bitcoin and it's clones will be lucky to become the Myspace of crypto currencies. More likely they will be the Frendster.

    That said, there are new entries into the crypto currency market waiting in the wings, that aren't based on Bitcoin. I suspect they will will succeed where the others fail.

    And THAT said, I'm not sure why anybody would bother with the trouble of BTC (given it's disadvantages) when there are services like Dwolla and KlicEx.

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  4. Isn't it rich, isn't it queer
    Lost all my Bitcoins, took it in the rear
    And where are the clowns
    Quick send in the clowns
    Don't bother they're here...

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