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Blockchain CEO Nic Cary used personal stories to illustrate bitcoin's disruptive potential at Inside Bitcoins New York.

We're slowly posting our favorite selections from Matt Boesler's "MOST IMPORTANT CHARTS IN THE WORLD" feature. 

We just wrote up the "Sotheby's indicator" from Jim Chanos which suggests run-ups in the auction house's stock price presage bubble bursts — and that we may be in the midst of a bubble now.

Another comes from Neil Dutta of Renaissance Capital, who takes an opposing view: that the U.S. economy has plenty more room to grow if one looks at durable goods spending and private investment relative to GDP. He writes:

"First, companies and consumers have been quite cautious since the recession ended in 2009. Eyeballing the figure, the cyclical sectors of the economy are still operating at levels that prevailed after the 1991 recession.

Second, the risk of a recession in the U.S. is microscopic. In the last two cycles, for example, bubbles in financial markets morphed to bubbles in the real economy — tech investment in the '90s and residential investment in the 2000s. There is little excess in the U.S., making it hard to see what would get cut if a recession were to ensue.

Finally, the cycle has a long road ahead. Expansions do not die of old age. This expansion is five years old but from a cyclical perspective, it's still young at heart."

This makes intuitive sense: Everyone has become hyper aware of bubbles and have thus become extremely circumspect about investing. Meanwhile, anyone with cash to burn apparently has so muchthey're prepared to burn a ton of it. For example: the entire Bitcoin experience. More than $100 million has now been poured into something completely unprecedented and experimental — and the backers say they have mentally reckoned with the prospect that they could lose everything. 

Anyway here's the chart:

SEE ALSO: The Most Important Charts In The World

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Dear Community, The time has come to flip to a new page in the magazine. My time as Editor-in-Chief at Bitcoin Magazine has come to an end. It has been a great honor and a tremendously fun and crazy adventure to take. From initial concept, to the form of a website and finally a paper magazine. We couldn’t have done it without your help and support. You believed in us from the beginning and for that I will always be grateful. One of the best parts of this entire Bitcoin adventure is the people you get to meet. Before starting this new chapter, I wanted to take a moment to thank again everyone for their support, passion and hard work. […]

The post A new chapter begins appeared first on Bitcoin Magazine.

It seems like not much has been going right in Bitcoin land these days.

Despite the hopes of evangelists that the fall of MtGox would mean the end of persistent headaches in the cryptocurrency's ecosystem, there has been a spate of new theft and fraud accusations. The most recent has emerged at Neo and Bee, a Cyprus-based organization thought to have opened the world's first Bitcoin bank branch. Cypriot authorities are now investigating claims that at least $48,000 have gone missing.  

Meanwhile Wall Street analysts have expressed doubt about the potential for Bitcoin as a viable currency, though suggested its underlying technology could prove useful.  Analysts at Goldman Sachs recently knocked down some of the key assumptions about why people should start using Bitcoin. Then UBS did mostly the same thing. And Warren Buffett has said the notion the digital currency has long-term potential is "a mirage."

As a result of all this, Bitcoin prices have fallen about 30% since the initial Gox price hit, and volatility has surged.

And yet.

In this same post-Gox period, we've continued to see a steady stream of new investments in and commitments to Bitcoin ventures. Late last month, crypto-payment group Circle announced it had closed a new $17 million funding around. SecondMarket CEO Barry Silbert, perhaps the most aggressive Bitcoin investor, not only announced plans for a U.S.-based digital currency exchange network, but also that he intends to beat the Winklevoss Twins to a Bitcoin ETF. The Chicago Sun-Times said it would start accepting Bitcoin payments for subscriptions, with Josh Metnick, the CTO of parent company Wrapports, saying they planned to extend that option to other products. And Marc Andreessen told the Wall Street Journal he planned to invest "hundreds of millions" more dollars in Bitcoin products. 

What gives?

The answer: A willful belief in Bitcoin's future potential. Wedbush analyst Gil Luria, who's covered Bitcoin for the investment service, says it's a sign belief in Bitcoin has basically become independent from headline-driven volatility. "VCs are all looking past the price and the noise at the promise of the underlying technology," he told us in an email. "Considering many see bitcoin technology as the most disruptive technology since Social (others would say since the Internet started) there is a tremendous amount of entrepreneurial activity emerging and VCs want to be involved." 

In an email, Circle CEO Jeremy Allaire used an analogy frequently deployed by Bitcoin enthusiasts, comparing both Bitcoin's potential and makeup to the World Wide Web to explain the continued capital flow.  

Bitcoin is an open Internet technology not dissimilar to SMTP or HTTP, which provided the foundation for innovations like email and the Web, and transformed industry and society forever. Bitcoin holds similar disruptive potential, most immediately as a new payments platform, modernizing how we use money, but also for applications that have yet to be imagined.

And he echoed what many are VCs are saying about the long game investors are playing:

Most of the leading VC investors are taking a long view on Bitcoin and negative headlines here and there represent minor hiccups for a technology that is extremely young and hasn't even reach its 1.0 release. I anticipate continued, aggressive investment in the space and an acceleration in startup activity across the ecosystem. 

Lightspeed Ventures CEO Jeremy Liew, one of the main backers of the BTC China exchange, says there's much more coming.

We’re at the very earliest stages of the Bitcoin investment cycle, and I would expect continued investment to flow into the sector over the next few years....This is going to be a long and bumpy road, but I think one that leads up and to the right. Most people who are interested in bitcoins potential are not focused on any short term changes or setbacks, but the longer term trend.

Even before this moment, venture capital groups had invested at least $134 million in Bitcoin-related firms and services, according to a report from the Aite Group. As of March 17, North American VC firms had banked a total of $98.6 million in Bitcoin-related projects. 

Still, it remains unclear how much money these firms are actually making at this point. Julie Conroy, the author of the Aite study, noted that even at its peak weight in the Bitcoin market, MtGox was earning just $1.3 million per year in revenue. 

And investors are under no illusion that price fluctuations may be scaring off potential users. 

Instead, they seem to be dedicating themselves to the long game. As Barry Silbert told us last week upon announcing his plans to found the first public Bitcoin ETF:

I do think vehicles like this will help to reduce it, it will be bringing in larger sums of money, which will ultimately reduce supply of Bitcoin subject to volatility. [SecondMarket's] vehicle will not in itself help, but it will help as more vehicles do hit the market."

One unknown remains what impact the IRS' ruling on Bitcoin taxes will have on this funding flow. Bitcoin tax expert Tyson Cross told us the new rules create a heavy bookkeeping burden on Bitcoin users. And in a recent debate with Felix Salmon, Barry Silbert admitted that could have a chilling effect on Bitcoin use in the U.S. At the same time, he said, American tax law has no bearing on the rest of hte world. 

It seems possible that Bitcoin could yet prove to be one of those technologies that ends up going viral simply because influential and wealthy keep telling us it should. To the existing Bitcoin community — the ones who'd have to bail for the project to really go south, that's all that matters.

SEE ALSO: St. Louis Fed Economist: Bitcoin Could Be A Useful Threat To Central Banks

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Bitcoin enthusiasts and critics alike discussed security, regulation and entrepreneurship at a panel discussion on Saturday.

Bitcoin will never take over the Euro, says Gijs Boudewijn, but provides useful technology.

Earlier today, Stefan Thomas took to bitcointalk to announce that Bitfinex had passed their Proof of Solvency audit.  The audit was conducted from Thomas’s home office in San Francisco and occurred on April 5th and 6th.  Bitfinex has hinted that they will be subject themselves to regular audits with different auditors each time in the […]

The post Bitfinex Passes Stefan Thomas’s Proof Of Solvency Audit appeared first on CryptoCoinsNews.

Another ASIC bitcoin mining hardware manufacturer is facing legal action over claimed failure to deliver product on time.

Speaking at Inside Bitcoins New York, the Circle CEO offered his advice for taking bitcoin to the next level.

Winner of the first Bitcoin Fight Night received bitcoin worth £5,000, while cryptocurrency fan Max Keiser 'defeated' paper money.

I’m just not a big fan of  “miners” No, not the miners themselves but the word itself may be a negative as bitcoin strives for popularity. The word throws us for a loop by taking us back to the days of gold mining and gold coins. So, naturally, bitcoin must be mined like gold but […]

The post Bitcoin Miners Might Give The Coin A Bad Image appeared first on CryptoCoinsNews.

As most people have now heard, the IRS just granted itself the power to tax the gains realized when individuals sell or spend their bitcoins — much like stocks. That means you are also responsible for knowing exactly how much your Bitcoin holdings have increased in dollar terms since you bought them. If you are a miner, it even means all those 1’s and 0s sitting idly on your cold storage hard drive are now considered gross income. Naturally, this has produced some trepidation among Bitcoin lovers, who now are obliged to keep incredibly onerous tax records if they want to stay on the right side of the law. Compliance will almost assuredly be an ongoing issue, given the private […]

The post Did the IRS Just Make Bitcoin a New Tax Loophole? appeared first on Bitcoin Magazine.

Identitymind's low-cost IGNITE service to give bitcoin startups the compliance help they need to focus on business.

Altcoins, or alternative cryptocurrencies such as

The post The Altcoin Debate Continues appeared first on Bitcoin Magazine.

Privacy loving search engine DuckDuckGo has started displaying bitcoin price quotes on bitcoin-related search queries.

The agreement means DigitalBTC is now one of the biggest players in bitcoin mining.

Big questions linger as House members discuss Bitcoin and its importance to small businesses.

When the House Committee on Small Business held its hearing last week about the benefits and risks of Bitcoin to entrepreneurs, it seemed like a lot the representatives were jumping into a rowdy conversation on the digital currency a bit late.

They were, after all, even behind the Internal Revenue Service, which a few days earlier had issued rules saying that Bitcoin would be treated like property, not currency, and was therefore subject to property taxes. But the representatives gave it their best shot, and some were even treated to a demonstration of a Bitcoin ATM, installed for the day at the Capitol by startup Robocoin.

"Despite not being backed by a government, or holding any intrinsic value of their own, Bitcoins are growing as an alternative payment method," Representative Scott Tipton (R., Colo.) said in prepared remarks at the start of the hearing.

Bitcoin, known as a cryptocurrency because it must be "mined" using blocks of code that keep the identities of users secret in transactions, is one of dozens of digital currencies created by small businesses and other innovators to exchange value, primarily on the Internet.

Certainly it's been a busy six months for Bitcoin and Bitcoin entrepreneurs. SilkRoad, the online bazaar, was shutdown in October when it came to light that Bitcoin was being used to fund illicit activities such as illegal drug purchases. Then in February, one of the biggest Bitcoin Exchanges, Mt GOX, filed for bankruptcy and shut down following a hack attack and the loss of $400 million in Bitcoin.

New York financial regulators also weighed in on Bitcoin in January, with as much erudition as Congress, but probably no more clarity about how to regulate the digital currency going forward. Regulators in the Big Apple have even proposed a Bitcoin license for small businesses transacting in the currency as a starting point.

On Capitol Hill, however, concerns were a bit more general. The Committee's Ranking member Nydia Velazquez (D., N.Y.) voiced concern that small businesses could get burned by wild price fluctuations of Bitcoin, which saw its trading value soar to more than $1,000 this past summer, up from as low as a few dollars several years ago.

"With swings like this, one has to wonder whether small businesses will find it difficult to continually price and reprice their products to ensure fair compensation from customers," Velazquez said.

Others, like Representative David Schweikert (R., Ariz.), wondered if Bitcoin could ever threaten our reserve currency, the U.S. dollar.

Mark T. Williams, a banking specialist and commodities and risk management expert at Boston University, who presented testimony during morning proceedings, tried to provide some clarity on that point.

"[Bitcoin] is a payment system, so you have competition within the payment system," Williams said. "And we'll see more asset classes that can be pushed through this payment system."

Dublin firm GSM Solutions, home to Ireland’s first bitcoin ATM, now pays its employees partly in bitcoin.

One of the funny things about Bitcoin is the way its terminology seems rooted in ancient monetary history.

First of all, there's the fact that it has "coin" in its name, harkening back to an increasingly irrelevant aspect of the monetary system.

And then there's the fact that to obtain coins you have to "mine" them by having your computer expend tons of electricity on seemingly pointless tasks. It seems very barbaric and ancient. And it's one reason that Bitcoin has gotten a lot of criticism.

But maybe the terminology is bad and the criticism is unwarranted.

David Andolfatto is a Vice President at the St. Louis Fed who recently made a presentation all about Bitcoin. Our Rob Wile interviewed him, and at one point, Andolfatto articulated something on the above matter better than pretty much anyone we have heard:

BI: How have your opinions on Bitcoin evolved since that first post?

DA: Early on, I thought, 'This was kind of silly,' and I kind of questioned the role of the miners, these miners who are mining bitcoin. And it led to the analogy of people mining for gold. I recall reading a blog post by Paul Krugman, who criticized Bitcoin. He was saying exactly what I was thinking: that this intensive effort to mine for gold ...We don't need more physical commodities. All that has to happen is the price level has to adjust. Economic theory says that kind of mining is inefficient.

I shared in that opinion, but I continued to read about it, and it struck me that that analogy was incorrect — that in fact what these miners were, was mislabeled. They were performing a communal service, a record-keeping service which is critical to any money system. Mining was a red herring, it's just one way to reward record keepers for their service, and that protocol could function even with constant supply.

This is really deep on multiple levels.

First of all, he's correct that mining is a flawed analogy. "Miners" are being rewarded for performing a task of network administration and transaction verification. One beauty of the system is that it doesn't need a centralized authority to confirm transactions because the computers on the seem are incented to take on that role.

And the last point is key too: There's actually no need for "more" coins. The creation of coins serves as a way of giving a fee to the miners (transaction verifiers) but it's not like a real commodity where you could ever have a true shortage that would require you to dig up some more. Bitcoins are infinitely divisible, and the price could rise infinitely, so there's plenty to work with. The only limiting factor is the amount of outside money people are willing to devote to it.

Bottom line: Andolfatto doesn't just understand Bitcoin well for a mainstream economist. He gets it and can articulate it better than even many Bitcoin advocates.

SEE ALSO: The full interview with David Andolfatto

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Figures suggest that mining a bitcoin is equivalent to burning around 16 gallons of gasoline.

Many people in the Bitcoin community have been fascinated by the idea of a relatively new project called Zerocoin. Although the Bitcoin core developers don’t seem like they’re going to implement this feature for improve anonymity on the Bitcoin blockchain, that won’t stop other altcoins from doing just that. The original team behind the Zerocoin […]

The post Anoncoin to Release Zerocoin Implementation on Testnet This Week appeared first on CryptoCoinsNews.

CoinDesk dines with the king of bitcoin bashing, risk management expert Mark T. Williams, and finds him ... quite reasonable.

Bitcoin price now languishes in the doldrums, the winds of favourable fortune having departed. But the wind always changes. Right now a slight breeze is stirring which could grow to the storm that sends the next major wave of adoption. The BitWasp project is developing open source marketplace software, with privacy and security built-in and […]

The post How The BitWasp Project Could Add Major Value To Bitcoin appeared first on CryptoCoinsNews.

Last week, St. Louis Fed vice president and director of research David Andolfatto released a presentation on Bitcoin, becoming one of the most prominent central bank officials to study the cryptocurrency.

We caught up with Andolfatto to ask him about why he put this deck together, where he thinks Bitcoin is going, and whether he personally has anything invested in it.

Business Insider: What was the genesis for this presentation?

David Andolfatt0: Its genesis was a blog post I'd started addressing arguments that gold bugs frequently put forth, that gold is superior money. Of course, Bitcoin was in the news — I read about the algorithm that fixes the supply of Bitcoins at least at some limit. It struck me that despite their tremendous disparity in physical properties, they share the quality that they have a relatively fixed supply — which is why gold and Bitcoin make lousy money.

I blogged some more on Bitcoin, and I brought to bear conventional theories of money and whether or not, just because it was virtual currency, whether it was good or bad.

Then Marcela Williams (the St. Louis Fed's External Communications for the Bank) came and asked whether I'd be interested in presenting a talk on Bitcoin.

BI: How have your opinions on Bitcoin evolved since that first post?

DA: Early on, I thought, 'This was kind of silly,' and I kind of questioned the role of the miners, these miners who are mining Bitcoin. And it led to the analogy of people mining for gold. I recall reading a blog post by Paul Krugman, who criticized Bitcoin. He was saying exactly what I was thinking: that this intensive effort to mine for gold...We don't need more physical commodities. All that has to happen is price level has to adjust. Economic theory says that kind of mining is inefficient.

I shared in that opinion, but I continued to read about it, and it struck me that that analogy was incorrect — that in fact what these miners were was mislabeled. They were performing a communal service, a record keeping service which is critical to any money system. Mining was a red herring, it's just one way to reward record keepers for their service, and that protocol could function even with constant supply.

BI: What were the main things you wanted readers to come away with from your presentation?

DA: I was trying to describe how things function today. When you think about Bitcoin as a potential rival to the U.S. dollar, it might have some trouble competing, because despite the fact that a computer algorithm governs its supply, like nature determines the supply of gold, that benefit of a theoretically stabilized price level is not necessarily something you want when there’s demand volatility. So takeaway No. 1 is that Bitcoin suffers from the same defect as gold — the standard volatility was very much like gold.

One thing that people have not thought too much, in this new world of competing cryptocurrencies, is that we’ve got a lot of experience in history of multiple competing currencies, and there's a nominal exchange rate problem. Economic theory says there's nothing fundamental to pin down the exchange rate between two intrinsically useless objects. If history is any guide, we're going to see multiple currencies circulating with extreme exchange rate volatility. So I asked, How do we think things are going to work out? Do we think merchants are going to accept several different virtual currencies? The relative prices remain stable? Really? What makes you think that? History shows these things are going to fluctuate like crazy.

So what does this mean? I just don't see Bitcoin replacing the U.S. dollar. The traditional way of controlling for [exchange rate] risk is to impose fixed exchange rates. The $5 bill trades at a 5:1 ratio to the $1 because we say so. But that goes counter to whole spirit of these cryptocurrencies. 

The U.S. dollar has already passed the market test. Some responded to me by saying, 'Yeah because, it's a monopoly.' But there are several competing currencies out there in the world. The U.S. dollar is still the go-to currency, but there's nothing domestically that prevents us from getting paid in pesos — Americans do have an opportunity to get paid in any currency they want.

But because the Fed has been manging the supply of dollars — which hasn't always been perfect — these bugs have been patched, which the Bitcoin protocol is still working through. Inflation (of the dollar) has been low and stable for the past 30 years; most people are happy.

BI: You said Bitcoin could pose a threat to central banks. What did you mean?

DA: I do think its existence as a threat is very good: It will discipline the Fed and other central banks to continue to run responsible policies — if they don’t, people could switch to something else.

The idea of currency competition: Many countries impose currency controls. In Albania, you would suffer severe consequences if you were caught with U.S. dollars in your pocket. The purpose of currency controls is to stimulate demand for domestic currency, because the central bank and the central government want to exploit the people by inflating excessively, so the threat of currency competition — if a central bank, a government knew people could stop using domestic currency and flock to alternative, that would force the government to behave more responsibly.

In the past, because of paper notes, a ban on foreign currencies was much easier. But now everybody's got a cellphone, a PC, how do you enforce those currency controls? There's no central authority — people are just trading these things using their telephones, so a government would have to take draconian measures to prevent that from happening.

So that’s not gonna happen in the U.S., but to the extent  there are other technologies looming out there, that threat might discipline central banks.

Business Insider: How is Bitcoin viewed within the Fed community?

DA: We support each other in our research, but much of the Fed is concerned with the size of our balance sheet — our efforts are more focused on that. But I haven’t had any pushback. There are some people within the system keeping an eye out — Francois Velde in Chicago also had a note on it. 

BI: What about Bitcoin's underlying technology?

DA: I made a distinction between Bitcon and Ripple. Bitcoin lives on its idea as a currency provider, but there other protocols that employ same cryptology that cryptocurrencies employ to concentrate on the payment side. Bitcoin does two things: it creates and manages a money supply, and works as a payment processor

Ripple is currency agnostic: It's currently happy to let the U.S. Fed manage the U.S. dollar — with Ripple you'll be able to send money across globe with Federal Reserve-backed money.

I'm not entirely sure what units [mobile banking service] mpesa uses, but these people are quite sophisticated, so what’s to stop them from downloading Ripple or Bitcoin, and start using them? They seem very receptive to this kind of thing. Especially in Africa and the undeveloped world, that’s where you see excessive inflation.

I don't see the same demand in the U.S., despite the criticisms of the Fed and the U.S. dollar...

Business Insider: Do you own any Bitcoin? Should people be buying it?

DA: No. It’s highly speculative — I don't think the average person wants to get in there. If you want to put $10 in to experiment...but I would not want to put in my life savings. It's usually volatile. You could get lucky, but you'd have to be careful. Let’s see how it evolves.

SEE ALSO: Check Out Andolfatto's Full Presentation

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