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| DATE | 2013-04-08 |
| FROM | Ruben Safir
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| SUBJECT | Subject: [NYLXS - HANGOUT] bitcoins are the future ...
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http://www.nysun.com/national/boom-in-bitcoins-challenges-bernanke-amid-sagging/88262/
Boom in Bitcoins Challenges Bernanke Amid Sagging Confidence in Fiat
Dollar
By GEORGE MELLOAN, Special to the Sun | April 8, 2013
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Things are wild in the Bitcoin market these days. As quoted on the Mt.
Gox exchange in Tokyo, the price of a Bitcoin has soared to $194 from
$36 in the space of 30 days. Volume has soared and so have Mt. Gox’s
problems in keeping order in this new and exotic form of currency.
Bitcoins are a global cyber-currency, invented only in 2009. They are
complex algorithms that can only be created through use of massive
computer power. Although they exist only in cyberspace, they are said to
have intrinsic value because they are so hard to produce (or
“mine” in the terminology of the trade.)
There is a limited supply, roughly 11 million in circulation. They are
privately created, privately traded and owned in cyber accounts called
“wallets.” They can be traded for a wide range of national
currencies. Bitcoin account holders can exchange them with each other
for tangible goods.
In other words, they are not subject to direct manipulation by the
central banks that create the national fiat currencies of common usage,
a practice dominated by Ben Bernanke’s Federal Reserve. There could
be a correlation between the growing loss of confidence in the dollar,
the euro and the yen and the sharply rising interest in money
alternatives, of which the Bitcoin is an intriguing new choice. Demand
seemed to get a particular boost last month from the Cypriot
government’s seizure of a portion of large deposit accounts in two
Cypriot banks to facilitate their bail-outs.
Success has been accompanied by headaches for the Mt. Gox team. They
posted a letter to account holders Thursday saying they had experienced
an “epic few days.” In 2012, Mt. Gox was handling an average of
only 9,000 to 10,000 new accounts a month. “This number doubled in
January, tripled in February and sextupled in March,” when over 57,
000 new accounts were created. The exchange has had to expand its staff
for handling new accounts to 22 from four and the expansion is
continuing.
Mt. Gox is not only trying to cope with sharply increased volume, the
increased activity has resulted in trading lags, errors and occasional
lost access to accounts. Mt. Gox said that there also has been a sharp
increase in what it calls DdoS attacks. It doesn’t know where they
are coming from but the exchange theorizes that raiders may be trying to
create panic selling to break the price, so that they can snap up
Bitcoins at lower values.
The letter sympathized with account holders. “We hate this situation
as well. Since we took over Mt. Gox we have been through hell and back
and we are still here. We are still the largest exchange with over
420,000 trades per month and USD $121 million monthly trade volume. We
have worked our way through all the requirements needed to run our
exchange legally.” The exchange is developing a new trading engine
that it hopes will solve some of its problems.
These are the problems of success in an infant industry. Who knows what
factors driving demand? Thin markets are subject to volatility. But
there is a certain attraction to a currency that cannot be created by
fiat by a central bank whose sole mission is to finance government
profligacy and irresponsibility. Bitcoins will likely thrive until
governments come up with money that is more trustworthy in terms of
future value than what they are issuing today.
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