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Goldman Sachs Explores a New World: Trading Bitcoin (wsj.com)
Several readers share a report: Goldman Sachs is weighing a new trading operation dedicated to bitcoin and other digital currencies, the first blue-chip Wall Street firm preparing to deal directly in this burgeoning yet controversial market (Editor's note: the link from WSJ, which originally reported this development, could be paywalled; alternative source), according to people familiar with the matter. Goldman's effort is in its early stages and may not proceed, the people said. The firm's interest, though, could boost bitcoin's standing among investors and fuel the debate around digital currencies, which were initially viewed as havens for illicit activity but are pushing further into the mainstream investment world. China in recent weeks has banned exchanges that trade bitcoin, fearing the virtual currency could provide an avenue for capital flight. J.P. Morgan Chase & Co Chief Executive James Dimon, whose bank is the largest dealer in global currencies, last month called bitcoin a "fraud" and said he would fire any employee who traded it. Yet Japan's government has embraced bitcoin, creating regulations to legitimize its trading. India and Sweden have mused about creating their own virtual currencies, and the U.S. Federal Reserve has studied bitcoin and the technology underpinning it.
it is underwritten by illicit activity - isn't that better than gold?
regulations will kill it and if it becomes more bank like then tacking / tax laws will be very hard to put in places without big changes.
it is underwritten by illicit activity - isn't that better than gold?
It is underwritten by speculation, not activity, illicit or legitimate.
How do you know if the monetary activity you're participating in is shady? Easy, when Goldman Sachs gets in on it too, you can be certain there is an exploitable financial angle somewhere.
Its already taxed. In the U.S. its considered an asset by the IRS. Mine it, report the basis (value on the day you received it) and your operating expenses (mining hardware, electricity). Hold it and then cash it out or "spend" it, report the value on the day you acquired and the day you disposed of it, report the capital gain or loss.
Yes its inconvenient to have to compute a capital gain/loss on those fractional coins used to buy a cup of coffee. But your wallet software can do that for you to simplify/automate the records for reporting purposes. Similarly if you want to trade then your exchange can automate all these records as well, just like online stock trading companies do.
Taxation will not kill bitcoin. The limitations of bitcoins design are its greatest threat. In the long term it may very well be displaced by a virtual currency of a different design. The blockchain concept will likely persist but that is something separate from bitcoin.
Bank Reporting Guidelines may hurt it as having accounts if no names does not fly even more so when there is over $10,000 in a single cash transaction or they are over other levels.
Bank Reporting Guidelines may hurt it as having accounts if no names does not fly even more so when there is over $10,000 in a single cash transaction or they are over other levels.
The US government recently shut down a very popular international exchange over exactly those issues, BTC-e. Bitcoin seems unaffected.
A nobel prize does not exempt him from giving some reasoning. All I can find in all those links is name calling, "bubble". The tech bubble was clearly over-inflated startups with absurdly dubious business plans and investors just trying pull one off on each other before the inevitable bust. The housing bubble was clearly something similar, although there was more value in homes, bankers were clearly trying to make money off selling loans they knew couldn't be repaid. They'd get their bonuses without recourse, so it didn't matter.
Bit arguing that bitcoin has is over-valued because it has no value is ridiculous. Neither does paper money... Gold really doesn't have much, either. It's just yellow rocks. Bitcoin has already proven itself by surviving numerous grandiose falls and subsequent restorations. I'm sure it bubbles all the time but ultimately prevails even beyond former values.
It just really gets me that this guy gives no reasoning for his claim. An economist should know better.. No Ph.D., title, or prize entitles you to make grandiose vague claims without reasons or evidence of some kind.
The fundamentals making bitcoin strong are clear: it's limited in quantity, decentralized control, and has proven resilient against extreme volatility over time. I am sure it will crash but it will rise again, as it always has unless some so-far unmentioned fundamental has changed. One fundamental weakness is that over time, transactions become slower. This certainly could reduce its value with age but that should be a slow process that also stabilizes it. Sheer volume should also stabilize it, more or less. It might be that he feels investors are just playing a game with it--buying high and selling low regardless of any intrinsic value. However, that's not at all unique to securities of various kinds. The thing that would render bitcoin more of a true currency is if people actually buy and sell goods and services with it.... This is currently limited..
Etherium, on the other hand, could well find more intrinsic value over time. Not only will its transactions remain swift over time and volume but transaction contracts can add substantial safety in buying and selling goods and services. For example, a transaction could depend on concurrent exchange values with other currencies. Let's say we developed a movie streaming service on a mesh network. Each study could submit movies that could be played to customers but only when etherium value is at a sufficient level for compensation. Of course, there would be incentives for both etherium highs and lows. If it's high, you could make an immediate exchange to dollars. If low, you could hold onto the etherium until it rises again, earning even more when it does. So such a service could be substantially more profitable then using U.S. dollars or any conventional currency.
How long will it be before the geniuses at the too-big-to-fail banks can find a way to totally screw up bitcoin?
CUR ALLOC 20195.....5804M
Back in the last financial crisis, Matt Taibbi described Goldman Sachs as "a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money". I guess nothing has changed much since then - they smell money, so they're going after it.
Have you read my blog lately?
More specifically, what's the difference between bitcoin and a non-dividend-paying, non-voting stock?
Both are worth how much someone is willing to pay for them, but bitcoin has a bit less friction in being able to be used in a transaction. Otherwise very similar.
Many people use, or want to use cryptocurrencies, because banks are such hypocritical assholes that are basically running the whole rigged game. They don't like BTC or any other thing that they don't control.
I will pay more in fees, wait more time, generally receive worse service if I can just avoid dealing with banks.