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minorman
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Education: Engineer (Ms. Sci. Eng.) and PhD My investment interests are focused on the global "macro picture" - with particular emphasis on resources and commodities. I am only interested in long-term positions - typically 4-10 years.
  • Best Currency In 2012 13 comments
    Dec 30, 2012 10:34 AM

    About this time last year I wrote an instablog about the best performing currency of the year 2011. There was one currency, which gained 1400% against the USD last year - and this same currency is again - by far - the best performing currency this year gaining another roughly 220% against the FEDs USD . .

    That is a two-year yield of 4400% vs. USD (from 0.3 USD/BTC to 13.4 USD/BTC). In gold terms, bitcoin is also doing well.

    But why does bitcoin keep going up?

    Several factors could be at play here. I'll just list a couple.

    1) Bitcoin has in November reached block 210.000. This means that the bitcoin p2p network has been running smoothly for four years (longer than almost any centralized e-currency ever has), and - more importantly - with block 210.000, 50% of all bitcoins to ever be issued are now in circulation. The next 25% will be issued over the next roughly 4 years.

    This is the beauty of deterministic monetary inflation - No central banker wildcards here!

    2) The "bitcoin economy" finally started to gain serious traction 2012. With awesome merchant services like bitpay.com (and others) accepting bitcoin payments (while getting payouts in regular fiat currencies) it is much easier than as ever before; and with companies like bitinstant.com which allows you to purchase bitcoins for cash at 700.000 locations, in places like Walgreen's, buying bitcoins has never been easier. Serious stores like bitcoinstore.com which allow you to buy your next computer or tablet directly with bitcoins are also coming of age. As a result of all this, the average number of daily transactions has exploded from about 3,500 transactions/day (worth $500,000/day) a year ago to 40,000 transactions/day now (worth $3,000,000/day). Chart1 Chart2

    3) Attention from big players.

    In 2012 the hosting service wordpress.com, which is the 22nd most accessed website in the world (hosting the blogs of The New York Times, CNN, Reuters and many, many more) have started accepted bitcoin - and for all the right reasons:

    "PayPal alone blocks access from over 60 countries, and many credit card companies have similar restrictions. Some are blocked for political reasons, some because of higher fraud rates, and some for other financial reasons. Whatever the reason, we don't think an individual blogger from Haiti, Ethiopia, or Kenya should have diminished access to the blogosphere because of payment issues they can't control. Our goal is to enable people, not block them."

    Furthermore, the ECB published a serious 55 page report on "virtual currencies" - of course highly centered on bitcoin (as it is the only game in town, really) - showing how (even) central bankers are beginning to understand that bitcoin is not just a fad or Ponzi, but a real near-future contender in global market for monetary services.

    4) The bitcoin business space has also started to attract venture capital in 2012. The service provider coinbase.com was funded by y-combinator and the bitcoin mining company, Coinlab, also received funding from Draper Associates and Geoff Entress. Mining hardware manufacturer, Butterflylabs, also attracted significant venture capital from an undisclosed source. Finally, Fred Wilson, principal of Union Square Ventures, has also expressed interest in Bitcoin a couple of times.

    5) Many, many more developments in 2012. Partial list:

    Bitcoin magazine started shipping;

    Launch of The Bitcoin Foundation;

    Blockchain.info launched an excellent hybrid ewallet service;

    The Bitcoin conference in London was a success;

    The birth of provably fair gambling and Satoshidice, Bitzino and others;

    bitcoin-2-email service Coinapult;

    in-game item exchange is rising;

    Explosive growth in the bitcoin reddit forum; ...

    -

    Remember, there will only ever be 21 million bitcoins. Period.

    The current "market cap" of all the bitcoins in circulation is just 140,000,000 in USD terms - and it is not yet "viral". If bitcoin goes "Gangnam style" you'd better be ready.

    Perhaps it is wise to own a couple?

    Themes: Currency, Forex, Bitcoin
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Comments (13)
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  • evoorhees
    , contributor
    Comments (4) | Send Message
     
    Good summary... it's amazing more people in the forex space haven't realized that Bitcoin is by far the best currency trade out there. And the reasons are pretty simple... it's the only currency (except PM's) that cannot be debased in perpetuity.
    30 Dec 2012, 11:17 AM Reply Like
  • Michael Fitzsimmons
    , contributor
    Comments (7931) | Send Message
     
    Nice article! You say:

     

    "bitinstant.com which allows you to purchase bitcoins for cash at 700.000 locations, in places like Walgreen's, buying bitcoins has never been easier."

     

    Seriously? I can go down to Walgreen's and buy bitcoins? How does it work...are they physical bitcoins or "e-coins" and if the later, how do I get them on my computer?
    30 Dec 2012, 11:33 AM Reply Like
  • minorman
    , contributor
    Comments (222) | Send Message
     
    Author’s reply » Yep.
    There is even a video tutorial here:
    http://bit.ly/S00ipW

     

    You get the (electronic) bitcoin to an address you specify. If you want to keep your private key an your own computer, I recommend you check out multibit: https://multibit.org
    30 Dec 2012, 11:48 AM Reply Like
  • Michael Fitzsimmons
    , contributor
    Comments (7931) | Send Message
     
    thx for that video. purchasing seems fairly straightforward. but i wonder about the key and wallet security. i need to find a day when i can do nothing but focus on bitcoin related issues. it's kind of hard to know which websites and/or mechanisms to trust.
    30 Dec 2012, 07:31 PM Reply Like
  • Jason Z
    , contributor
    Comments (86) | Send Message
     
    Just use blockchain.info as pointed out in the article. It's easy and secure. Your remain in control of your wallet.
    31 Dec 2012, 10:03 AM Reply Like
  • sgornick
    , contributor
    Comments (5) | Send Message
     
    Not to nitpic, but ...

     

    The BTC/USD exchange rate at the open of Jan 1, 2012 was $4.72, so the current $13.40 level puts the rise at 183% not 220%.

     

    Now at the same time the argument could be made that a person who bought bitcoins on December 31st, 2012 and held them today is up 220%. And that would be a true statement.

     

    But how can those two numbers, 183% and 220% be reconciled? Well, because the bitcoin exchange rate is volatile. It is seeing less fluctuations over time but it still sees large spikes are quick dips sporadically. And on December 31st, 2012 the exchange rate was sitting in the range of $4.20 before a huge buy took the exchange rate up nearly 20%.

     

    So both of those statistics are correct but the one using the open price on January 1st should be referenced, and since 2012 is not yet over, the December 31st closing price is not yet known -- but the increase is currently around 183%.
    30 Dec 2012, 11:45 AM Reply Like
  • minorman
    , contributor
    Comments (222) | Send Message
     
    Author’s reply » I agree. The trouble is that when I wrote my review last year, I did it on the 29th of December when the price was 4.2 USD - so I wanted to make two reviews consistent. Not my fault that bitcoin prices shot up at the turn of the year last year ;-)

     

    But thanks for the nitpic!
    30 Dec 2012, 12:02 PM Reply Like
  • vssa
    , contributor
    Comment (1) | Send Message
     
    Her is some of my Bitcoin price analysis -end-of-one-year-circle:http://bit.ly/WUUdcl
    31 Dec 2012, 02:17 AM Reply Like
  • minorman
    , contributor
    Comments (222) | Send Message
     
    Author’s reply » Another interesting link about bitcoin from runtogold.com

     

    http://bit.ly/VuuohQ
    2 Jan 2013, 12:53 PM Reply Like
  • Trace Mayer
    , contributor
    Comments (151) | Send Message
     
    Good job minorman, a great summary of several important reasons why the nascent Bitcoin juggernaut keeps growing and gaining momentum.
    2 Jan 2013, 03:10 PM Reply Like
  • crozz
    , contributor
    Comments (298) | Send Message
     
    Like
    5 Jan 2013, 06:06 AM Reply Like
  • minorman
    , contributor
    Comments (222) | Send Message
     
    Author’s reply » Bitcoin is getting increasing attention here on SA: http://seekingalpha.co...
    31 Jan 2013, 04:47 AM Reply Like
  • Sierra Leslie
    , contributor
    Comment (1) | Send Message
     
    ‘Ziddu is paying more’ than any crypto currency mining for more information, please visit http://goo.gl/8INZsI
    12 May, 09:06 AM Reply Like
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