Bitcoin surges, it is a way of evading capital controls

Bitcoin surged by as much as 7 percent on Tuesday and was on track for its longest winning streak in 18 months, as concerns that Greece could tumble out of the euro drove speculators and Greek depositors into the decentralised digital currency.

I am fine with this, I should add.  But no, I don’t think it represents the onset of a new monetary order.  In case you doubt what is going on here:

Scigala said over the past two months, with Greece locked in talks with its creditors, the company had seen a 124 percent pick-up in inflows from Greek IP addresses—numerical labels that identify computers and other internet-enabled devices.

For the pointer I thank Jerry Brito.  Here is my earlier post on Bitcoin, China, and capital controls.

Comments

Here's where Zimbabwe made a mistake. They should have bought a million U.S. dollars of Bitcoin, then used that to back the zimdollar, instead of what they did do.

http://bigstory.ap.org/article/a993a6af4fdc4f84903a13d08066fe51/zimbabweans-trade-old-currency-peanuts

If a zimdollar was suddenly backed by a pseudohard cryptocurrency,
say 1 zimdollar to 1 femtoBitcoin or whatever it works out to be, there would be a great deal of foreign interest in the zimdollar. It would be the only way to trade in Bitcoins using physical money.

Just last week it was announced that officially the Zimdollar would be replaced by the US dollar (already de facto that has occurred). Another mistake...

You'd have to trust the Zimbabwean government to keep its word and not debase the currency. Given past history, the risk premium would be very high.

Wall Street is driving Bitcoin speculation. The dirty secret nobody understands or even knows about. Whatever currency comes into play, Wall Street will control.

Usury at its finest.

Shorting opportunity.

I don't understand the mechanics.

A person in Greece wanting to buy bitcoins needs to wire an amount of currency to some location, presumeably outside of Greece. However, if they can do that (they can right now) then they could simply buy euros and hold them physically.

This doesn't seem overly different from normal cash.

That won't work because it won't help the people who have hoarded bitcoins make a profit.

Nor would it help the Horwitz & Andreesen and others who have invested in Bitcoin tech startups realize profits from their investments.

+1 to Axa. It's much easier to change Greek-Euros to German-Euros than to learn how to hold Bitcoin.

"Bitcoin goes up on capital controls" is generally a good heuristic for single-country currencies, though.

I don't think it is that different, that's the point. People are hoarding cash, buying gold, buying other valuables, and a few of them are even buying bitcoin. They're just diversifying. What if someone breaks in and steals your under the mattress euro stash?

Bitcoin is vulnerable to physical as well as electronic theft.

Greeks can open German bank accounts, can't they?

"Greeks can open German bank accounts, can’t they"

Not easily. While EU banks deal with each other freely, and EU bushiness transactions are fairly smooth, it's still surprisingly difficult for an EU national to set up a bank account outside his/her country of citizenship/residence. I had an Irish friend try to do this for his parents back in 2007, and he was shocked what a hassle it was. Eventually, he gave up and used US accounts.

Yes, it is doable, but it's nothing like interstate banking in the US.

Thanks, I'll have to update my worldview.

Wow. Pretty bad when a foreigner finds it *easier* to set up a US bank account!

The thinking is that most people don't have the knowledge to circumvent capital controls for paper currency... Those people simply buy Bitcoin with euros locally, but then can easily take Bitcoin out of the country.

Other people, who are specialists in circumventing capital controls, take the euros to the US (or whatever) to purchase Bitcoins, then sell them on the Grecian market for a premium.

That Vaultoro has had a 124% increase in Greek activity is meaningless. This exchange accounts for less than 0.1% of daily volume of btc and has an extremely low user base. There is an increase of Greek IP addresses? So? It's going from 8 computers to 17 computers, and they arent even buying coins. The real rise in price is due to BIP100 restoring dev confidence in the block size debate. It's a worse headline, but that's what is happening.

Bitcoin can only help people evade capital controls as long as the impact is small enough that the governments chose to ignore it.

"Bitcoin surged by as much as 7 percent on Tuesday"

Probably was your posts on Sunday and Tuesday that did it.

Note that you've been consistently wrong about Bitcoin for years now.

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