In troubled times...
Money heads for safe havens. No other explanation necessary.
Now what is stuffed in that mattress of mine??
BOFH remark: Boy this gold stuff sure is heavy!
The well-publicised idea that Cyprus could pinch ten per cent of all local savings accounts to help pay for its government's budgetary woes seems to have sparked a rush of interest in the crypto-currency Bitcoin. According to Bloomberg, Bitcoin apps are soaring up the download charts in Spain, of all places, based on BGR reports …
Money heads for safe havens. No other explanation necessary.
Now what is stuffed in that mattress of mine??
BOFH remark: Boy this gold stuff sure is heavy!
Bitcoin is a safe haven? When did that happen?
Bitcoin might actually be safer than a Southern European bank at this point. A good rule of thumb is to keep the majority of your money in largely Protestant countries unless of course its ill gotten gains in which case its hard to beat the Vatican itself.
"Bitcoin might actually be safer than a Southern European bank at this point."
In that case, I think they are fucked.
Bitcoins safe? I'm not sure I would rank bitcoins as safer than euro stored in a bank backed by a deposit guarantee, the ecb and Germany's determination to keep it's latest conquest of Europe (sorry I meant the single currency) together.
I think bitcoins are interesting, not useless, but I personally would shift my life savings into them even if the alternative was a Spanish bank. Isn't it more possible people are trying to game the exchange rates by taking advantage of the sheep effect in investing? If I was worried about my Spanish bank, a quick trip to Germany to open an account would be a possible solution. Failing that, pick a stable foreign currency thats actually backed by a central back, government and economy.
> I'm not sure I would rank bitcoins as safer than euro stored in a bank backed by a deposit guarantee, the ecb
Cyprus *had* a deposit guarantee, they just threatened to bypass it by taxing deposits. And it was the ECB who was encouraging this theft of depositor funds. The sudden interest in bitcoin is from other people in Europe wondering which other banks might decide to renege on their guarantees.
I agree that shifting your life savings into bitcoin is a bad idea, it is too new and unstable for that. But being inherently transnational, it is a good way to move your money to a safe haven outside the control of the ECB and euro bankers. The risk in using it for funds transfer is much lower, since you would hold them for only a short period of time.
"Bitcoin might actually be safer than a Southern European bank"
Like, for example, the Amagerbanken and Fjordbank Mors banks in Denmark whose whose depositors over 100.000€ were given a nice free haircut in 2011.
I don't know, maybe it they were located in southern Denmark.
" euro stored in a bank backed by a deposit guarantee"
The rest of the EU is telling Cyprus: "you either renege on your deposit guarantee, or we won't loan you the €10bn or so out of the €16bn that you need". Well, they're not saying EXACTLY that, they're telling Cyprus that it has to come up with the extra €6bn on it's own, but there's little else from where Cyprus can get €6bn if not by plundering deposits.
It's a bit complicated by the €100,000 limit on the deposit guarantee... Cyprus COULD kepp guaranteeing deposits under €100k but would then need to give a much larger haircut to deposits above €100k, a lot of which is held be Russians and Russian companies (a lot suspected to be dodgy but that's by-the-by). Cyprus is rightly worried that if it gives a huge haircut to €100k+ deposits, teh Russians will pull their money out and their economy is screwed despit ethe extra €16bn loan.
So, caught between a rock and a hard place
Sadly only one upvote available from me, for such a nice summary.
It's now a toss-up as to whether the Euro is safer than Bitcoins. Which given my very low opinion of the Bitcoin system is a shocking indictment of the piss-poor, verging on insane, actions of the Eurogroup recently.
So far as I can see, the collapse of the Euro is pretty much inevitable at this point. Like the Gold Standard in the 1930s Depression. It could still be saved, but because the politicians in the creditor countries have spent the last couple of years pandering to their voters' prejudices - rather than trying to persuade them that things need to change, I don't see it as politically possible. There are several easy (but expensive ways) to solve the problem - but they're all going to be expensive, require co-operation and require the people with the money to lose lots of it, and the people who need the money to hand over control of their economies to the loud-mouthed ones with the cash (who've spent the last 3 years telling them what lazy good-for-nothing wankers they are.
The only thing that keeps things going, is that no-one can believe it's going to go wrong. No-one's scared enough to do what needs to be done to save the Euro. By the time they are, it'll be too late. But because they're not yet scared enough, they still buy government bonds from Italy or Spain, and they leave their money in the bank.
You also have to ask, how safe is a Germany bank if you're Spanish? Sure, theoretically you keep the lovely Euros, or get new D Marks. But if Spain defaults, what's to stop Germany from simply converting all Spanish depositor's cash to their new currency and keeping the profits to offset against their huge losses from the default?
If I was Cyprus I'd default at this point. Russia won't save them, and the Eurozone are making it worse. The very terms they're forcing on them with this bail-out will destroy the Cypriot banking system. In a controlled manner, rather than default I guess. But it looks deliberate. That'll collapse the Cypriot economy, and they'll go into a Greek-style death spiral. Hence needing another bail-out in 2 years. So even though they'd only lose 10% of their deposits now (better than leaving the Euro destroying 50%), they'll lose it all later anyway.
So default on all foreign debtors. Leave the Euro and devalue. Issue government debt to your own banks in your new currency, to keep them solvent - default on the rest. Basically do an Iceland, but you have to create a currency to do it at the same time, so it'll be worse. It'll be horrible, but the threat of it might bring the Eurogroup to their senses, and if not, it's almost certainly better than what's just happened to Greece. Give them the same ultimatum they gave Cyprus last weekend, go into a meeting on Saturday saying, 'we default on Monday' unless you give us a deal tonight. The Germans spent the first 6 months of 2012 saying fuck Greece, we're going to push them out of the Euro. They didn't dare when it came to it. I doubt they would here.
Edit: Sorry for the rant. I think this is the angriest I've ever been at a political issue, certainly that I can remember. It's the childishness and stupidity of the Germans in particular that pisses me off. They seem to think they can piss all over Southern Europe without suffering themselves. I don't blame them for not wanting to bail anyone out. That's totally understandable. But they won't leave the Euro, they've blocked all possible solutions, but they won't be honest and just walk away themselves. I've no problems with people acting in their own self-interest, and us getting defeated in EU votes. Annoying, but not to get angry about. But this whole ya-boo-sucks to you scroungers has destroyed Greece, will probably do the same to Spain, is doing it to Cyprus. And it's self defeating. If you lend people money, it's in your own interests to help them pay it back. Fuck them over enough, and they'll tell you to get stuffed. Then you destroy your own economy too.
"Cyprus *had* a deposit guarantee, they just threatened to bypass it by taxing deposits. And it was the ECB who was encouraging this theft of depositor funds. The sudden interest in bitcoin is from other people in Europe wondering which other banks might decide to renege on their guarantees."
Apparently it was the IMF that were the cheer leaders. The ECB went along with it (gratefully) to spare Angela Merkel's blushes in the upcoming election in September. As she will doubtless lose that I, for one, am looking forward nervously to the resultant fall out.
"Bitcoin is a safe haven? When did that happen?"
After the last speech on economic policy by the Spanish government, by the looks of it. :)
None of this is really news - giving depositors a haircut is simply the latest increment when it comes to boiling the frog. Some are even saying that it's early days yet, which shows how fast asleep they are! Frankly, I regard the fact that a European-wide bank run didn't happen on Monday as proof beyond all doubt that the vast majority of people are not capable of thinking for themselves - but have been successfully herded, much like cattle, toward the financial abbatoir.
They have only themselves to blame.
Early days was the grand theft that was MF Global - and, not much later, came the encore that was PFG. Cyprus is only yet another increment in the same game - and the game is legalised theft on a global scale. This won't stop with Cyprus, either - New Zealand is already considering taking similar action, and you can bet more countries will follow - especially when they can justify prior usage - and yet the frog still doesn't leap from the boiling water to save himself.
In the end, you know what happens - don't you?
I can't blame those who want to invest in BitCoin, although I don't see much future for the currency in the event of a reasonably large solar flare. However, much can be said about other digital currencies, too - if the solar flare of 1859 was enough to take out the telegraph systems of the time (or an entire Canadian province in 1989), I doubt many people will be left with power (let alone remain online to trade their BitCoins) in the event of a similar flare today.
That leaves gold and silver as reasonably secure stores of wealth that have stood the test of time, and - as of last week, apparently, keeping your savings in a physical piece of metal you can own and keep somewhere safe now carries a 6.5% to 9.9% premium over keeping it in a bank account, where the bank officially owns it, and all you have is an I.O.U. written on your monthly statement.
Possession is nine tenths of the law, after all.
Bottom line is when anyone *invests* money, they know they might lose it (which is the case of the owners of Cypriot debt). Anyone who puts it in a savings account *should* have a guarantee of those savings (which is the case of bank account holders, not only Cypriot but across the Eurozone), and the bank *should* be acting solely as a custodian of that money and has a fiduciary duty towards depositors to take care of that money.
The root of the whole shebang is fractional reserve banking, that allows the banks to expose themselves to liabilities that are far, far higher than their assets. When fractional reserve banking was invented (back in the Hanseatic league IIRC), these problems arose and were recognised, and as long as the fraction was kept low, and the banks were conservative in their judgements, the system worked OK.
Then in the 80s we had the Gordon Gecko revolution and suddenly banks were no longer happy with 5% profits, they needed 10%, 15%, 20%, share price rises through the roof and increased profits every quarter so teh traders and CEOs can get their multi-million bonuses. And to accomplish that it was a race to higher and higher yielding assets (which of course are more and more risky), fueled by higher and higher multipliers in the fractional reserve. It's monopoly being played with fake money, and once the fake money is blown, they want to come after the real money.
Well, FU Mr. Speculator, you gambled and you lost, go home to a cardboard box wearing a bedsheet. Which in real terms means, whichever way you look at it the Cypriot economy is f***ed, but if they default at least they crashed and can rebuild on their own terms. If they give in all that is happening is that they are accepting another €16bn loan, which they still will have to repay down the line, while all the time their economy will implode anyway, and at that point they don't even have any control because that's still in th ehands of the Eurozone. And you know what, a few months / years down the line, they can't pay off this new loan either and it's the same story all over again.
> regulatory notice from Brussels to arrive sooner rather than later
I do hope the irony is apparent in having an outfit of thieving taxfeeders that manages to put the reputation of its oh so sacrosanct paper money down the shitter while enriching friends and family, but then pretends to have the moral authority to "regulate" something.
The mere fact that a scare has cranked up the bitcoin price by that much is proof that socking your money there is a stupid idea. Any currency that fluctuates like that is likely to eat more than a 5% loss from ham-handed spanish banking.
I really like the idea of crypto-currency as a way to make anonymous micropayments practical, but I can't help thinking that bitcoin is designed to pounce on and make vanish people's savings the first time there's significant real money attached to it.
A couple years ago one of the largest BC exchanges had a flash-crash down to a penny a coin for brief moments, and hundreds of thousands of dollars worth of coins went bye-bye. The exchange rolled back transactions they could, but if you were fast to withdraw the coins, there was nothing to be done about it other than for them to ask nicely to give it back.
What people don't realize about the recent court rulings that "legitimized" bitcoin transactions is basically, they're saying "you're on your own". By not putting exchanges under regulation, that means you've got nowhere to turn if your bitcoin bank fails or is simply embezzeled from. It's like trusting Eve online players with your bank account.
"By not putting exchanges under regulation, that means you've got nowhere to turn if your bitcoin bank fails or is simply embezzeled from. It's like trusting Eve online players with your bank account."
So why has Bitcoin continued for so long? Simple stupidity? I mean yeah, it was fun and cool when it was new, but that's long past. Is it just momentum?
Yes. It is simple stupidity combined with over large egos that think they are outsmarting "the system".
"So why has Bitcoin continued for so long? Simple stupidity? I mean yeah, it was fun and cool when it was new, but that's long past. Is it just momentum?"
It's a pyramid, and those in the lower layers seem still to believe there is money to be made by recruiting further layers. Pyramids can go up as well as down. They have to go up before they collapse spectacularly. For various technical reasons, it's also in the interests of large botnet operators to keep it going, because it helps monetise their botnets.
I used to play EVE online. That's exactly what Bitcoin has always reminded me of.
I think even the banks that weren't run as frauds from the beginning eventually collapsed. After several years of what must be quite hard real work, you're sitting on a pile of in game cash that can be worth thousands of real pounds. Perhaps you're bored of the game anyway? Why not take the money?
I seem to recall there was one person who had a hard disk die, and lost a bunch of data as to whose money was whose. Then just thought sod it, and so stole the lot.
It seems most people don't actually use it this way, but one of the most interesting aspects of bitcoin is that you don't need a bank, or a payment processor, or any of that. You can just run the software locally and keep, send or receive bitcoins yourself.
I do agree completely that the instability makes it a risky investment though.
Been spiking for over a year....
The Economist did a graph on its rate to the US$ tracking search terms. http://www.economist.com/blogs/graphicdetail/2013/03/daily-chart-12 (sub may be required)
Quite an interesting article (both that and this).
I'm probably missing something obvious here but, my understanding is that generating or even 'forging' Bitcoins is deemed nigh on impossible due to the sheer processor time required, which is why most Bitcoin generating apps use the GPU instead of the CPU to crunch the numbers.
However, given Mr Moore and his pesky law and also the general ingenuity of the hacking fraternity, t'would seem to be a bit of a 'no-brainer' to assume that a few years from now we'll either have computers 'whose merest operating paramaters our current ones are unworthy to calculate', which will be able to shit out bit coins like a friendly slot machine... or the inevitable hole in the crypto will have been discovered, enabling the script kiddies of the future to do likewise.
Either way, I think the oul' mattress is a safer long-term bet.
There currently are, ASICs that will shit them out faster than enything else, but the way bitcoin mining works means the more power there is to shit them out, the more complex it becomes to make them. Bitcoin are set to make a specific amount per time period, if it goes quicker than that, after a specific number of coins made, the complexity increases to slow the generation down. So it only matters with processing power if only a few people have a large amount of it, as then they would be generating most of the coins, making most of the money. if everyone has it, it stays the same as it always has.
Moors law has its limitations:
What if I had *two* dyson sphere computers?
Why would you want to put all your life savings in to a "currency" that's only been around for a couple of years, can't be considered stable and will be gone again in a few more years?
And for the above reason, they should stay clear of the Euro...
Is this like that graph you see where lottery spending rockets the closer you get to the redundancy date?
It'd be better "investing" in the 3:05 at Newmarket than Bitcoin.
...that you guys in the UK were right to steer clear of the Euro.
Spain's fucked and I think the locals need their bumps felt if they think Bitcoin is the the place to hide their savings. But I suppose desperate times = desperate measures...
Cyprus is royally fucked too, and they're not going to get any help off anybody. Maybe they could make nice with the Turks? Sell passports to the Russians for €1m a time?
But hey, at least they've got nice weather to enjoy while they're sitting around without a pot to piss in, unlike Ireland...
All hail Gordon Brown! He may have been a crap Chancellor and a rubbish Prime Minister, but he stopped Blair from getting us into the Euro. And a pre-Iraq Blair might well have been able to persuade people to join. He had the magic touch with the voters.
Will there be public statues to Gordon Brown in the future for this?
Perhaps we could move the Eurostar terminal back to Waterloo station. And we could have statues of Lloyd-George and Churchill in front of a giant picture of Bobby Moore lifting the World Cup in 1966 - plus a statue of a Gordon Brown looking grumpy...
Will there be public statues to Gordon Brown in the future for this?
I think, for now, you should just be happy you're not being put over Angela Merkel's knee and given a spanking.
Oh, I don't know about that. Some people would pay good money for a bit of correction from a strong, dominant hausfrau such as herself...
A certain ex F1 supremo might, if the tabloid press and youtube videos are anything to go by!
I would rather gamble my money on diversified shares portfolio than bitcoins.
Ahh, such optimism.
Give it another year or two, and you'll be wishing you invested in go-juice, leather jackets and baseball bats with six inch nails hammered through the business end.
Ah, yes. The legendary "dreadnought Louisville Slugger, festooned with nails". Basil Hosmer would be proud!
Some facts about Bitcoin...
Bitcoin website says: Instant peer to peer transactions; but if you read deeper, they say: Transactions are broadcast within seconds and verified within 10 to 60 minutes. That's true, I waited many times 20 minutes. And if we add exchangers who transfer money to your account in 3-4 days... Then why we should use BTC when there is already paypal?
They say Bitcoin operate with no central authority, I would say: yes, yes, central authority are developers and MtGox, they possess BTC market and they make fictive transactions to decide the value of bitcoin, other exchangers just follow MtGox, so, many of them have fictive buying and selling BTC just to change value of BTC.
Population don't care if BTC is opensource or not, only programmers care about it.
Salesmen need steady currency and BTC change its value every now and then, for the benefit of developers who possess millions of BTC. Salesmen hate to change prices of products every day or more times per day. When I see people say BTC is steady currency, it is like ideology or hypnosis, they repeat the same mantra and people believe in that. Anybody can see that BTC is not steady than inflatory speculative currency. That's good for exchangers but not for salesmen.
I bought 2000 BTC last summer, cost me just over £6,500. Took the view they couldn't go much below the $5 or so they were back then. With the pathetic interest rates on offer I viewed it as a bit of fun where I might make 20% or so on them. I sold them yesterday for £98,000. Only downside is the £25K CGT I'm gonna have to pay
Are you sure it attracts CGT as it's just a currency exchange (despite your enormous windfall)?
Conversely if the price had plummeted would you have had the opportunity to claim it as a tax deductible loss?
AFAIK it's untouchable by the taxman... At the moment.
"This won't stop with Cyprus, either - New Zealand is already considering taking similar action, and you can bet more countries will follow - especially when they can justify prior usage - and yet the frog still doesn't leap from the boiling water to save himself."
No NZ is not considering taking similar action - what is being considered is the possibility of putting legislation in place that would allow the action to be taken as a last resort should it ever be required - not quite the same thing.
Looks like you would be better off going to Monte Carlo and playing Baccarat.