Bitcoin Price Plunges, Prompting Concerns About ‘Mining’ Activity

Coinbase, a company that lets people store and buy the digital currency bitcoin, is in the process of raising a giant new investment that will value it around $400 million, multiple sources told Re/code.

The price of Bitcoin surged by more than 10x, from $87 to over $1000, as Chinese savers piled in…. until emerging-market central banks in places like China, India, Taiwan, and Thailand started to grasp the threat that Bitcoin’s rise posed in a world where US monetary policy was tightening and capital flows could reverse dramatically.

However, with the growing popularity of Bitcoins, government agencies are coming up with proposals regarding bitcoin exchange rate and other virtual currencies. The New York State Department of Financial Services proposed regulations that would require companies dealing with the buy, sell, transfer or storage of Bitcoins to record the identity of customers. The Bitcoin transactions will have to be recorded and reported in case of transactions are worth $10,000 or more. In March 2014, the Internal Revenue Service (IRS) decided that Bitcoins will be treated as property for tax purposes.

But the worst was to come: obscurity. A hefty hack may hurt bitcoin temporarily, but far worse for the currency is no one talking about it at all. And over the second half of 2014, that’s what happened. As conversation and excitement about bitcoin dried up, so too did the currency’s value, dropping from more than $900 a coin at its peak in January to just $334 today.

Now some might see ever-falling prices as a good thing, but they would induce a different type of instability in the system. Given the overwhelming extent of global debt, I think the chances of moving to a physical currency based on gold are slim to none, and Slim left on the morning train. Go back and read the economic history of the latter half of the 1800s in the US. From one point of view it was a golden era of growth and prosperity driven by huge leaps in technology. But it created serious problems for many of those on the lower economic rungs. If you think income inequality is a problem today, then you won’t like what happened in the late 1800s.

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