My advice: Buy Bitcoin now
Due to a few difficulties with the market places, hacking and legislation Bitcoin is currently trading at a four month low and it's a bargain price. Let me explain why, writes Billy Bambrough
Due to a few difficulties with the market places, hacking and legislation Bitcoin is currently trading at a four month low and it’s a bargain price. Let me explain why, writes Billy Bambrough
There are a two main reasons why the Bitcoin price is especially low right now. The first reason is that before Christmas the price inflated too quickly and this is a natural re-adjustment. It was a classic bubble and the reduction we are seeing now is certainly no cause for alarm, it’s just normal market fluctuations. This cause for the price fall is relatively straight forward and needs little further explanation; the price grew too quickly due to media attention and a hard core of Bitcoin fans pushing up the price (if they were sensible they’d have bought out back in December) and has now returned to a more natural level.
The second reason is that Bitcoin has undeniably been through a few setbacks over the past two weeks, ones that could have been much worse for the price and people’s perception of the currency had they occurred when media interest was high at the end of 2013.
I want to briefly break down why these setbacks are not actually bad news for Bitcoin long term (although if you’re trying to make money on short term speculation the next few months will be vastly different from the previous).
This time last week there were reports of a triple whammy hitting Bitcoin; Japan-based MT Gox temporarily suspended withdrawals, Apple removed all Bitcoin wallets from its App Store, and Russia made it illegal to use Bitcoin as a currency (not actually banning it as many reports suggested). A week on and two further things have gone wrong for Bitcoin: Bitstamp, an exchange that did particularly well following the exodus from MT Gox also suspended withdrawals (as did BTC-e), and just this morning the Silkroad 2, a popular follow-up to the infamous Silkroad black market which was shut down by the Feds last year, disappeared along with over $2m worth of Bitcoins.
To me, by far the most damaging of this series of unfortunate events is the failure of the exchanges. These exchanges are integral to Bitcoin, and, while the currency can survive without them, so few people would have and move Bitcoin that it would be all but dead in the water. If people don’t trust the exchanges then Bitcoin could be finished. It isn’t of course, but it came as close as it has done to being snuffed out.
The reason MT Gox (the name for which comically came from the sites original purpose, a Magic: The Gathering card game exchange) suspended withdrawals is not, of course due to some inherent and irredeemable flaw in the Bitcoin code but because MT Gox software devs are stubborn and over confident. They failed to fix an issue which has been widely known to the majority of Bitcoin devs since 2011 in which the transactions are unable to verified. While a key (see here for more on this) feature of Bitcoin the fix is relatively straight forward and I doubt we’ll be hearing about it again.
The reason for Bitstamp’s (amongst others) halt on withdrawals is due to a huge DDoS attack, widely known to happen to all largest sites from time to time and usually blamed on groups such as Syrian Electronic Army. Other than spooking the market as either deposits and withdrawals may not be possible for a short time, these attacks have zero effect on the security of Bitcoin.
According to the Bitcoin news site CoinDesk both exchanges plan on being operational again at some time today and have only not come back up yet because they are undergoing security and stress tests.
After this blow all the others are so inconsequential that I’m not going to order them.
Apple is anti-competition
This is neither surprising nor damaging. Anyone who realistically wanted to use Bitcoin should be well aware of Apples walled garden approach to its ecosystem and that it wouldn’t stand for people using a currency it wasn’t getting a cut of. In the long term it makes no difference, people will use Bitcoin and Apple removing it’s apps won’t change that, there are too many other options available.
Expect to see much more from Apple in the next couple of years in payments, especially as iBeacon seems to be getting traction.
Russia makes Bitcoin "illegal"
Despite many reports claiming Bitcoin is now illegal in Russia, it is no such thing. The Russian Prosecutor General’s office has issued a strongly worded but effectively meaningless statement on virtual currencies, warning: "Russia’s official currency is the rouble. The introduction of other types of currencies and the issue of money surrogates are banned." This bans business from officially accepting Bitcoin, not people trading it.
Like Apple, Russia just wants its cut and once it’s taxed (as it will ultimately be) then the situation will change. Similarly to being gay in Russia, if you’re using Bitcoin you might want to keep it too yourself and be careful what you Google.
Silkroad déjà vu
Silkroad 2 reported earlier today it has been "hacked" and has lost all the Bitcoins that were currently in its control, a tidy sum of $2m worth. Whether you believe that the site was hacked or not (there is speculation that the people who ran Silkroad 2 just up and left with all the Bitcoins they could stuff into their virtual pockets) anyone who uses Bitcoin for drugs, guns, and illegal services deserves to lose it.
The fewer Silkroad kind of sites there are in existence the better Bitcoin will be in the long run. As it is anonymous internet cash Bitcoin ill always be used for things people would rather keep to themselves but using it illegally cannot be defended.