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Bitcoin The Almighty Buck

This Whole Bitcoin Thing Could Be Big, Says Bank of America 276

Posted by samzenpus
from the better-than-barter dept.
Nerval's Lobster writes "Bank of America has issued a research report suggesting that the crypto-currency Bitcoin could become 'a major means of payment for e-commerce' on its way to emerging as 'a serious competitor to traditional money transfer providers.' The bank attaches a 'maximum market capitalization' of Bitcoin at roughly $1,300, based on its position as a 'major player in both e-commerce and money transfer' as well as 'a significant store of value with a reputation close to silver.' Bitcoin has come close to exceeding that theoretical ceiling in recent weeks, although its valuation dove today after the People's Bank of China decided to declare it a volatile 'currency' without real legal status; that financial institution is also concerned about its use in money laundering and black markets. Bank of America sees Bitcoins' advantages as low transaction costs, its finite supply (which will protect its value), and its increasing attractiveness as an alternative to 'traditional' cash. As with the People's Bank of China, however, the bank sees the currency's extreme volatility and lack of legal backing as a bad thing, and frowns at the possibility that regulators could step in and increase transaction costs. 'A 50 minute wait before payment receipt confirmation is received will prohibit wider use,' the report adds. 'This is less of an issue for two parties that know each other because they trust the other will not double spend, but when dealing with an anonymous counterparty this creates a high level of unhedgeable risk.' Without a 'central counterparty' to verify transactions and thus mitigate that risk, Bitcoin could fail to break into wider use."
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This Whole Bitcoin Thing Could Be Big, Says Bank of America

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  • by bkmoore (1910118) on Friday December 06, 2013 @01:38AM (#45616229)
    1. An "investment" vehicle that is based on an arcane mathematical model that nobody understands...check.
    2. A gold rush mentality and lots of media interest...check.
    3. Banks and other prominent "investors" that are saying that "this time it's different"...check.

    “I can calculate the motion of heavenly bodies but not the madness of people.” -Sir Isaac Newton after losing a fortune in the South Sea Company bubble.

  • Re:It's official (Score:5, Insightful)

    by Derec01 (1668942) on Friday December 06, 2013 @01:53AM (#45616297)

    I'm not going to argue that Bitcoin won't dip in value in the future, perhaps precipitously, but the fascinating thing about Bitcoin is that after that happens....it will still be there. They don't disappear, and other than signalling from other participants in the market, nothing will have changed about it.

    Beanie babies fall apart. Penny stock companies go bankrupt. Tulip bulbs and all that eventually rot, burn, or get destroyed.

    I don't think that persistent state is a trivial difference. Bitcoin will still be there, with a price history that will encourage speculators again. The Bitcoin network will be running on some networked computers on the planet for decades to come, no matter what. The net present value calculation for Bitcoin really does have to go out much much farther than almost any other object besides precious metals and gems.

  • by cervesaebraciator (2352888) on Friday December 06, 2013 @01:55AM (#45616303)
    Chill. Relax. Folks aren't going to throw money into an investment with no value beyond fleeting popular perception. Nothing like that will ever happen. Just calm down. Enjoy life. Stop and smell the tulips [wikipedia.org].
  • by Anonymous Coward on Friday December 06, 2013 @01:55AM (#45616307)

    There is no such thing as intrinsic value to begin with. People place value in things.

  • by tlhIngan (30335) <slashdot@wor f . n et> on Friday December 06, 2013 @01:56AM (#45616317)

    Initially the Wall Street guys were against Bitcoin because they couldn't figure out how to make money off of it. But now they've studied it and studied it and studied it, and now you're seeing the results of the research - they've found ways to manipulate it in the same fashion as regular currency markets.

    BoA is just the start - expect the rest of Wall Street to start investing heavily in Bitcoins as they try to eke out fractional coins on every transaction. And the Bitcoin infrastructure is near the point where it's "too big to fail" - even if it crashes, there's too much entrenched to abandon it completely, creating a perfect opportunity for the suits to actually acquire even more cheaply.

    Oh yeah, they'll probably also find a way to do HFT using it, so get ready to parse billions of new entries in the blockchain. Don't underestimate the mathematical prowess of bankers - once they show interest, they've found ways to make money off it.

  • by Narcocide (102829) on Friday December 06, 2013 @02:01AM (#45616333) Homepage

    BofA's angle is probably the same as with your money. Charge you to hold it, charge you to transfer it, charge you to talk to a phone support rep about holding it or transferring it, and while holding it for you, gamble with it on the side.

  • by Derec01 (1668942) on Friday December 06, 2013 @02:01AM (#45616335)

    There is no such thing as intrinsic value to begin with. People place value in things.

    Absolutely correct. However, it's that process of how humans value things that make it an interesting case. We have in our economy a network of things that have some generally agreed upon value. When people try to value something, they look at the activity its used for and the value of that activity within the current network, and so the value is subject to the changes in that object's use.

    Ignoring mining, with Bitcoin there is no function within the current universe of things we value. The only cue I have is what others have previously valued it at, and what it is currently valued. I think that's very interesting, especially when you consider the kind of objects that humans have used as currency throughout history (gold, metals, durable objects like shells, etc.)

  • by fuzzyfuzzyfungus (1223518) on Friday December 06, 2013 @02:12AM (#45616391) Journal

    There is no such thing as intrinsic value to begin with. People place value in things.

    Capital-V "VALUE" is a purely mental abstraction, about which one can wax Platonic and ultimately empty; but the distinction between commodities or instruments with substantial utility (iron, aluminum, books, potatoes) and ones that are kept around mostly because they symbolize 'value' ($20 bills, gold, bitcoins) is arguably still relevant.

    I don't entirely like the term 'intrinsic value', 'utility' might be closer; but some commodities are like D-list celebrities, who are famous primarily for their fame, and are valued primarily for their value, while others are valued because of the various purposes they serve. The lists overlap (gold, say, has a number of specialty applications in electronics; but would be extremely unlikely to command its present price if it had the same prestige as iron); but even when they do, the delta between the assigned value and the value in utility is usually pretty noticeable.

  • 50 minutes? (Score:5, Insightful)

    by greenrom (576281) on Friday December 06, 2013 @02:20AM (#45616431)
    How long does it take a check to clear or do an ACH transfer? Longer than 50 minutes? In reality, you don't have to wait 50 minutes to be reasonably certain a transaction will complete. You can see the transaction broadcasted to multiple peers within seconds. For small transactions, that's probably enough. Usually a transaction will make it into the blockchain in about 10 minutes. At that point, the only way to invalidate the transaction would be for a miner to fork the blockchain by computing an alternate longer chain. Since there are many competing miners, in practice this would be very difficult. After a few more blocks have been added to the chain, it would be virtually impossible to reverse the transaction. For very large transactions involving thousands or millions of dollars, it probably makes sense to wait 50 minutes for multiple confirmations, but for smaller transactions it's definitely overkill.
  • by Taco Cowboy (5327) on Friday December 06, 2013 @02:27AM (#45616455) Journal

    Bank of America is always looking for new ways to screw over their "customers", be it through fees, lying, or trying to steal their (paid off) houses through foreclosure (and blaming it on "computer error" when caught). They're probably drooling like hungry dogs over all the ways they can fleece people with Bitcoin...

    I'm afraid that Bank of America is not the ONLY bank which screws their customers.

    In fact, I have yet to find a bank which has failed to screw their customers.

  • by globaljustin (574257) <justinglobal @ g m a i l.com> on Friday December 06, 2013 @02:46AM (#45616521) Homepage Journal

    I read through the report and it was weird to me as well...

    I can't place it exactly...it had a 'Stepford Wives' sheen to it. It seemed fake.

    Wonder what model BoA valuers have in mind for this. It weirds me out.

    It seems unthinkable to me, but BoA could be looking to be a BTC exchange like Mt. Gox or Bitpay.

    It's all about controlling the gateways. BoA loves fees, and they'd make a ton of $$$ charging people to convert BTC to a currency of choice.

    Until you can buy gas, groceries, and pay credit card, mortgage, and government fees/taxes with Bitcoin the true power and value of the currency is in controlling the gateway to **actual currency**

    That's the final unavoidable pinch point where everyone has to "pay the man"

    BoA wants to be that "man"

  • by Anonymous Coward on Friday December 06, 2013 @03:05AM (#45616613)
    Have you tried a credit union?
  • Imagine that (Score:4, Insightful)

    by Smerta (1855348) on Friday December 06, 2013 @03:07AM (#45616621)
    Huh, imagine that.

    Bank of America saying that a "central counterparty" is required to verify the transaction and mitigate risk. Wonder if they have anyone in mind?

  • by mathimus1863 (1120437) on Friday December 06, 2013 @03:22AM (#45616659)
    We should all like this Bitcoin *concept* even if we don't all like Bitcoin itself or the culture that has evolved around it (and the get-rich-quick Bitcoin fan-boys). But all the bashing of the Bitcoin concept is disappointing, because Bitcoin represents everything that us nerds reading slashdot should like: It's a mix of cryptography, freedom of speech, computing, networking, finance, economics, and even politics. Most of us here dig that stuff.

    Get over the hype and take Bitcoin for what it really is: a fascinating experiment that has, so far, withstood the amazing barrage of publicity, hacking attempts, legal uncertainties, and remains valuable for reasons completely contrary to everyone that says it's worthless. It may become worthless one day, but consider the possibility that Bitcoin is disproving all your wildly oversimplified assumptions about what makes something valuable. It is completely different than anything else we know, and there's plenty of reasons to believe that it could succeed as much as it could fail. (and in many ways it has already succeeded as a proof-of-concept of the idea of decentralized currency)

    Why does gold have value? Nothing is backing gold, and if it was for its material properties alone, its value would only be a fraction of $1,300/oz. Yet it maintains value because of its properties to behave as a transferable store of value: scarcity, fungibility, density, identifiability, etc. Bitcoin shares a lot of those qualities and adds some new ones: ease of transfer over the internet, negligible transfer fees, fungibility, scarcity, storage efficiency, near-anonymity and built-in escrow. I don't think it's any more ludicrous for Bitcoin to have value than it is for gold to have value. And in the end, when I want to sell WoW weapons, buy webserver space, or play a few games of poker online, why would I use credit cards or paypal, which all require me to remember log-in creditials, give away personal information to be [improperly] protected by a third-party and/or pay a bunch of fees. There's plenty of value in being able to pay people across the world, instantaneously, without sacrificing your privacy, and without paying any fees. Why is that not valuable?

    When you want to bash Bitcoin by saying it has no intrinsic value, ask yourself this: "what other system of payment/transfers allows someone to move $10,000,000 worth of value, to or from anywhere in the world, 24/7, nearly instantaneously, without fees, can't be debased or printed, irreverible, and without anyone being able to freeze or seize it (without direct access to your wallet)?" Regardless of its downsides, that's pretty f***ing powerful. There's a reason it's "could be a big deal."
  • by Anonymous Coward on Friday December 06, 2013 @03:50AM (#45616725)

    ...ask yourself this: "what other system of payment/transfers allows someone to...

    An infinite number of them actually - but they haven't been invented yet. An optimistic future for bitcoin is that owning bitcoins becomes like owning foreign currency: a handful of major (digital) currency exchanges allow people to buy and sell from a selection of thousands of different competing digital currencies. A less optimistic future is that bitcoin goes the way the Mosaic web browser - a major player in the early days but now superseded by other, more capable, technology.

  • by Anonymous Coward on Friday December 06, 2013 @05:09AM (#45616977)

    The US dollar has one unbeatable use: paying taxes. If you hoard gold and bitcoins, the sheriff of Nottingham is going to come after you for some US dollars.

  • by Vintermann (400722) on Friday December 06, 2013 @05:13AM (#45616989) Homepage

    > You can't use BTC for any non-electronic transaction. That's alot of transactions.

    You can, if you're really good at doing math in your head.

    Seriously, though, you can use tricks to print redeemable coins on bits of paper. Using these, you can make transactions enitrely offline... but since the recipient can't know that the paper is worth anything until he uses a computer to check it, you need a bit of trust.

    Since these days even poor people prioritize getting a cell phone, there's really little need for non-electronic transactions.

  • by Seumas (6865) on Friday December 06, 2013 @08:38AM (#45617633)

    I can't put my finger on why, exactly, but the whole pushing a cashless society thing really makes me uneasy. Especially things like http://betterthancash.org/ [betterthancash.org] , which is targeted at the poor and developing countries. I realize that much or even most of our current financial lives are carried out digitally, but when it comes down to it the only thing better than cold hard cash that can not be directly seized from you, subjected to computer or human errors, or denied to you during emergencies are things with intrinsic value (gold, silver and other items mankind puts real value into as a thing unto itself). When people like Bill Gates, Citi, BofA, the United Nations, Mastercard, and Visa are all on board the "physical money is bad" train, I don't trust it one fucking bit.

  • by fatphil (181876) on Friday December 06, 2013 @10:58AM (#45618519) Homepage
    > When people like Bill Gates, Citi, [...] are all on board the "physical money is bad" train, I don't trust it one fucking bit.

    Thank you for including good ole Bill on that list. As an igtheist, it really riles me when he is held up as being altruistic. Noone who promotes Monsanto is doing anything positive for the world.

When speculation has done its worst, two plus two still equals four. -- S. Johnson

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