Why Bitcoin Boomed During the Government Shutdown

Daniel_Stuckey writes "Just two weeks after the Feds shuttered the Silk Road, the notorious online drug bazaar, Bitcoin prices have touched a five-month high — with a single Bitcoin fetching nearly $156 on Tokyo-based exchange Mt. Gox. Bitcoin's resiliency can no longer be denied, especially as the digital currency continued its ascendancy even against the backdrop of a U.S. government in utter disarray. At the 11th hour of the crisis, President Obama signed a bill that ended the partial government shutdown and, more importantly, raised the debt ceiling, an arbitrary limit on the amount of money the country can borrow that would have been surpassed today. If Congress had failed to reach a deal and the U.S. was unable to pay its bills, the results might have been catastrophic, eclipsing the bankruptcy of Lehman Brothers five years ago, the domino that could trigger the worst financial crisis since the Great Depression."

Comments

This is proof? Really?

[Anonymous Coward]

How many people honestly understand the relationship between currency prices and the government shutdown? Very very few I would guess.

Gold dropped when the goverment was down and bounced back after the deal was signed. Why? Gold is supposed to be a safe harbour.

Does the author of TFA see BTC as the opposite of gold, or does he see BTC as filling the same kind of role as gold?

Or is this simply a case of making using hindsight to construct an argument that fits a general argument that BTC is worth investing in?

Re:This is proof? Really?

[Bite The Pillow]

That is disingenuous at best. Gold peaked at 1900 in 2011 during the housing and financial crises from 400 in 2003. It has been on the way down since then, making a spike unlikely. It took a 3% dip from 10 October and came back to where it was.

All signs point to gold markets knowing this would be a temporary crisis that would not maintain price levels past its resolution. Bitcoin, on the other hand, does not seem to be valued by market savvy investors. Knee jerk irrational fools more like, so it follows the panic more closely.

I'm no economist or fund manager, so I'm probably wrong.

Re:China exchange controls

[Animats]

Right. China has tight exchange controls - it take special permission from the State Ministry for Foreign Exchange to exchange yuan for dollars, euros, or yen. But at present, China residents can buy Bitcoins with yuan. They can also sell Bitcoins for dollars, bypassing exchange controls. So if you've made money in China and want, say, to buy an apartment in London, Bitcoin provides a way to bypass the government exchange controls.

That seems to be what's pushing up the price of Bitcoin. The volume on exchanges in China is way up, while volume at Mt.Gox is way down.

However, there's no guarantee that this situation will last. The People's Bank of China can change this policy at any time. There's plenty of info available about PBOC policy; it's as least as important as US Fed policy. But that's enough for Slashdot readers.