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Undead! Bitcoin rises from its virtual grave


via Flickr © zcopley (CC BY-SA 2.0)

Zombie awakes as Chinese speculators resuscitate the digital currency.

  • US banks investing in blockchain ledger technology to make things 'safe'.
  • EU court legitimises Bitcoin by exempting transactions from tax.
  • Pat-down time. Is your real wallet still in your real pocket?

Trouble's looming with what is perhaps the ultimate in comic-book villains, an unholy duo comprising US bankers and Chinese speculators, both suddenly taking a renewed interest in Bitcoin following a rapid and mysterious surge in the 'value' of the virtual currency which most of the world's population had already forgotten about.

But no it's not dead,it has just been lying doggo somewhere in the darker outer reaches of cyberspace, waiting for something to happen. And now it has. The price of one Bitcoin is on the move massively and quickly upwards. Two days ago it shot up above the US$500 mark and although it fell back yesterday to closer to $400, it's value has more than doubled in the past month.

The attraction of Bitcoin is that it is a vehicle for moving money around the world via the Internet very quickly, with complete anonymity and without resort to third-party verification. Hence its attraction to criminals, dictators and demagogues.

Indeed, to say that Bitcoin has had a chequered history is an understatement of epic proportions. Apart from being the currency of choice of the barbaric terrorist group ISIS, Bitcoin was also the common 'cash' denominator of various other criminal enterprises ranging from drugs, arms and people smugglers through to kidnappers, ransomers, extortionists and on to slimy bottom-feeding Ponzi scheme hucksters. But it all fell apart with the crash of the biggest Bitcoin exchange, the Tokyo, Japan-based Mt. Gox, back in early 2014. Remember? It went went belly-up it was discovered that some 850,000 Bitcoins, supposedly worth $450 million, had disappeared.

Bitcoin's resurgence has largely been one result of the rapid slow down in the Chinese economy and the commensurate decline in stock market values there. That's why Chinese speculators have turned to Bitcoin and the price of the virtual currency is rising much faster in the PRC than anywhere else on the planet.

One might have though that those rushing in to turn a quick (and real) greenback by investing in a virtual currency the value of which has been up and down like a whore's drawers since the day it was introduced, might look to history and temper their enthusiasms but returns are currently running at about 36 per cent and as gambling is gambling, each player will be hoping that the or she will be prescient enough to cash-out of the over-inflated bubble at exactly the right moment to maximise profit whilst those, even greedier but not quite so quick, will carry the can, lose out and be left rootling glumly through an empty digital wallet.

Outbreak of unnatural exuberance spreads from China to the US and Europe

The rise in the popularity in the use of Bitcoin in China is having a knock-on effect in the US and in Europe with mainstream American banks while sniffing excitedly at the scent of real money wafting on the Wall Street breeze are sufficiently wary, so far at least, to invest in Blockchain, a company providing the underpinning 'ledger' technology though and on which to store Bitcoins, rather than in Bitcoin itself. However, outside the 'traditional' banking sector some US financial enterprises are already speculating in Bitcoin-related investments.

(By the way, a 'blockchain' is "a transaction database shared by all nodes participating in a system based on the Bitcoin protocol. A full copy of a currency's block chain contains every transaction ever executed in the currency. With this information, one can find out how much value belonged to each address at any point in history."). Allegedly.

And then, only last week, the Nasdaq introduced 'Linq', a new system to permit shares in start-ups to be recorded and traded on a ledger, such as Blockchain, to allow and manage trades more quickly than existing systems.

Meanwhile, across the Atlantic, the  European Union has just ruled that Bitcoin transactions should, henceforth, should be treated in exactly the same way as all other recognised payment methodologies and will therefore be exempt from the imposition of value-added tax.

We know that  people do have short memories - but not that short. Post-2008 and the US financial scandals and the resulting and continuing misery they caused, many people are very wary of those who enthuse and evangelise so publicly about "innovation" in the banking sector. That sort of hype is often a precursor to more trouble and a signal for sensible men to check that their real wallets, containing real money, are still safely in place in their real pockets.

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