From an investor perspective, putting money into Bitcoin requires an exchange that isn't crooked or incompetent, and has significant volume. There are none left. Of the US dollar exchanges:

• Bitstamp - two guys somewhere in Slovenia with a mailbox in London who are $15 million in the hole.
• Mt. Gox - in liquidation.
• Bitfinex - "The Bitfinex trading platform is currently in a beta phase (testing phase). The platform is owned and operated by iFinex Inc. (Bvi), and during this final phase the platform is being prepared to operate under a fully licensed model."
• BTC-e - total buy side market depth right now, BTC225.

Everybody else in USD is too tiny to matter.

The China exchanges matter, but the volume there is widely assumed to be fake, and the prices may also be fake.

Bitstamp was the last exchange that appeared to be legit, and they blew it.

Well, the price is back to where it was before Bitstamp went down - around $275-$280. Bitstamp being down only had a temporary effect.

The Paycoin debacle diverted some mining power from Bitcoin for a while, but that's over. (So is Paycoin, probably; it's dropped from $20 to $3, despite GAW's claim that they were going to support the market. Paycoin seems to have been just a pump and dump.)

The $300 support level for Bitcoin has been broken. It wasn't a dramatic event, just part of the long slide.

Outlook: meh.

Well, there are the possible outcomes. What do you think?

Yomiuri Shimbun exclusive

"Among about 650,000 bitcoins that went missing from failed Mt. Gox’s exchange system, about 7,000 bitcoins, or only about 1 percent of the total, were lost due to cyber-attacks and it is highly suspected that the remaining 99 percent disappeared after the system was fraudulently operated by an unknown party, according to sources in the Metropolitan Police Department.

The missing amount — about 650,000 bitcoins — is worth about ¥24.7 billion as of Wednesday.

The MPD is currently investigating Mt. Gox, suspecting a person who is familiar with the exchange system may have misappropriated bitcoins of the company’s customers."

To read more, pick up the Jan. 3 print edition of The Japan News.

Since the beginning of October, the price of Bitcoin has been about where it is now, $350 ±  50. There were brief excursions outside that range, but they didn't last. Difficulty has also leveled off. The last difficulty was a slight downward change.

What if that's what 2015 looks like? The Silk Road and China bubbles have run its course. Without some big outside event, there's no particular reason for the price to move much.

The speculators would be bored, but as a medium of exchange, Bitcoin might be more useful.

Coinbase has announced a "USD wallet". Now you can put money into Coinbase without buying Bitcoins. This makes them a Bitcoin broker/exchange.

As with other exchanges, don't keep any funds there you're not actively trading. Coinbase does not offer the insurance or legal protections of a bank account, and over the history of Bitcoin, more than half the exchanges have gone bust.

[Google Trends for "Bitcoin" searches.]

Google Trends for "Bitcoin" searches.

The first peak in 2011 is when Bitcoin got initial attention.
The second peak in mid-2013 is the China bubble.
The third and biggest peak in 2014 is the Mt. Gox collapse.

The first two were when the two big Bitcoin runups happened.  The Mt. Gox collapse, no so much.

Post Mt. Gox, the hype level has been modest, and the price has been flat or declining.

[wget http://bitcointalk.org]

Try doing

wget http://bitcointalk.org

three times in quick succession. The first two will succeed. The third one will stall, wget will retry, and then it will work.

This seems to be some kind of DDOS prevention thing, but failing after two tries is way too soon.  I noticed this because our web crawler at "sitetruth.com" thinks bitcointalk.org is down, or has no web site.

What's doing this?

[The code:]

Here's an interesting bug, which may be related to some DDOS-prevention tool on "bitcointalk.org". Our SiteTruth site rating system keeps reporting that "bitcointalk.org" has no web site. This is because, if you make certain HTTP requests more than twice to "bitcointalk.org", the site blocks you for a minute. At the bottom of this post is a Python 2.7 program you can use to demonstrate this. The output of the program looks like this:

>\python27\python timeoutbugtest2.py
Try 0:
MyURLOpener opening request: http://bitcointalk.org [('Accept', '*/*'), ('User-agent', 'SiteTruth.com site rating system')]
 Opened OK.
Try 1:
MyURLOpener opening request: http://bitcointalk.org [('Accept', '*/*'), ('User-agent', 'SiteTruth.com site rating system')]
 Opened OK.
Try 2:
MyURLOpener opening request: http://bitcointalk.org [('Accept', '*/*'), ('User-agent', 'SiteTruth.com site rating system')]
 Open FAILED: ('http://bitcointalk.org', u'HTTP error - timed out.')
Waiting 60 seconds before retry.
Try 3:
MyURLOpener opening request: http://bitcointalk.org [('Accept', '*/*'), ('User-agent', 'SiteTruth.com site rating system')]
 Opened OK.
Try 4:
MyURLOpener opening request: http://bitcointalk.org [('Accept', '*/*'), ('User-agent', 'SiteTruth.com site rating system')]
 Opened OK.
Try 5:
MyURLOpener opening request: http://bitcointalk.org [('Accept', '*/*'), ('User-agent', 'SiteTruth.com site rating system')]
 Open FAILED: ('http://bitcointalk.org', u'HTTP error - timed out.')
Waiting 60 seconds before retry.
Try 6:
MyURLOpener opening request: http://bitcointalk.org [('Accept', '*/*'), ('User-agent', 'SiteTruth.com site rating system')]
 Opened OK.
Try 7:
MyURLOpener opening request: http://bitcointalk.org [('Accept', '*/*'), ('User-agent', 'SiteTruth.com site rating system')]
 Opened OK.
Try 8:
MyURLOpener opening request: http://bitcointalk.org [('Accept', '*/*'), ('User-agent', 'SiteTruth.com site rating system')]
 Open FAILED: ('http://bitcointalk.org', u'HTTP error - timed out.')
Waiting 60 seconds before retry.

This continues indefinitely - two successful opens, then a timeout, wait 1 minute, repeat.

It's not clear what sets this off.  Browsers don't seem to trigger it. Our site rating system does, though. When it starts rating a site, it makes a few requests ("example.com", "www.example.com", an HTTPS request, etc., checking for redirects and trying to find the front door to the site.) That's enough to trigger this.

Anyone associated with the site know what's going on, and what's in the path to the site? This could be some load-balancer or firewall problem.

How do you contact the people behind "bitcointalk", anyway.

The code:

#
#   Test for SiteTruth URL timeout bug.
#
import urlparse
import urllib2
import time
import encodings

kuseragent = "SiteTruth.com site rating system"    # USER-AGENT sent when crawling
kdefaultsockettimeout = 15.0        # allow this much time seconds for socket timeout

#   Class InfoException  --  used for exceptions related to a page or URL
#
#   Usage:   InfoException(url, message)
#
class InfoException(Exception) :
   "Information from external website was not as expected"
   def __init__(self, *args) :            # Initializer
      self.url = args[0]               # save troubled URL
      self.errmsg = unicode(args[1])      # save problem
      Exception.__init__(self,args)      # initialize parent

   def __unicode__(self) :               # convert to string
      msg = u'Problem with page "%s": %s.' % (self.url, self.errmsg)
      return(msg)


def open(purl) :
        try:                                        # catch only "Unicode error" in URL
            headers = { "User-agent" : kuseragent }  # set our user agent
            req = urllib2.Request(purl, None, headers)      # build request
            #    Workaround for Coyote Point load-balancer bug.
            #    If the last field is User-agent, and it ends with "m" but doesn't otherwise contain "m",
            #    a Coyote Point load balancer will drop the packet.  So we add an extra header
            #    that really isn't necessary.
            req.add_header('Accept', '*/*')         # add unnecessary header
            print("MyURLOpener opening request: %s %s" % (purl, repr(req.header_items())))   ## ***TEMP***
            result = urllib2.urlopen(req, None, kdefaultsockettimeout)        # do the open
        except UnicodeError:                        # bad domain name syntax in Unicode format
            raise socket.gaierror("Syntax error in domain name")    # treat as get-address-error error
        except urllib2.HTTPError as message :
            raise InfoException(purl, u'HTTP error - %s.' % (unicode(message.code)))
        except urllib2.URLError as message :
            message = getattr(message,'reason',message)        # use "Reason" if available"
            raise InfoException(purl, 'HTTP error - %s.' % (unicode(message)))
        return(result)                              # return result of open
        
#
#   Main program
#   
def main() :
    retrydelay = 60                                 # wait 60 seconds before retry
    for tries in range(100) :
        print("Try %d:" % (tries,))
        try :
            fd = open("http://bitcointalk.org")                  # URL causing problem
            print(" Opened OK.")
            fd.close()
        except (InfoException,EnvironmentError,) as message:
            print(" Open FAILED: %s " % (message,))
            print("Waiting %d seconds before retry." % (retrydelay,))
            time.sleep(retrydelay)
    
main()

Right now, there is a huge dump of 13780 bitcoins on Bitstamp, offered at $300. That's the current price.

[Bitcoin transaction volume in USD.]

Bitcoin transaction volume in USD.

Take a look at the last year of Bitcoin transaction volume in USD. There was the China bubble, a big spike and decline, and then the Mt. Gox manipulation/collapse, a huge but very brief spike. Then the transaction volume in USD settled down. For the last six months, it's been surprisingly flat.

What this means isn't entirely clear, but it does indicate that Bitcoin usage is not increasing.

[Hash rate, recent weeks.]

Hash rate, recent weeks.

The cost numbers have been indicating that it's time for some miners to drop out, and that seems to be happening.

If the green line stays below the red line, the difficulty will drop at the next adjustment.

The People's Bank of China has, as we all know, restricted banks from dealing with Bitcoin, to enforce China's exchange control laws. But mining is "manufacturing" and "exporting". Building a mining operation and selling Bitcoins for dollars or euros is just fine under China's laws. There are even incentives. Some of those mining farms may be benefiting from low-cost loans and other incentives some cities in China provide to encourage manufacturing startups. Is anyone in China able to comment on this?

Where, exactly, is Coinbase?

From the user agreement on their web site: "Coinbase, Inc., 548 Market Street, #23008, San Francisco, CA 94104." That's a mailbox store. It's the same one Tradehill used.

From FinCen registration: "1811 Silverside Rd, Wilmington, DE 19810". This is the address of Chabad Lubavitch of Delaware, which is a religious facility.

From their SEC filing: "1 BLUXOME STREET, APT. 410 SAN FRANCISCO CA 94107 415-843-1515". That's an apartment.

Dun and Bradstreet has the apartment address. California Sec. of State has the Market St. mail drop.

Be suspicious, especially since people are reporting withdrawal problems.

There's been interest in "ASIC-resistant" proof of work algorithms. SCRYPT was supposed to do that, but ASICs have been built for SCRYPT, so that didn't work. What would work?

I'd suggest trying to come up with an algorithm which requires large numbers of 64-bit floating point operations and considerable memory. Inverting big matrices (1000x1000 or up) is a good example. Any ASIC capable of doing big matrix inversions would have to have multiple 64-bit superscalar FPUs inside, plus caches. It would have to be a number-crunching CPU. It would need a gate count comparable to CPUs of equivalent compute power.

So can anybody come up with a suitable mineable algorithm with some big matrix inversions inside?

Bitcoin now looks like a mature technology. The software has settled down, there's been a modest level of merchant adoption, the transaction rate hasn't increased all that much over the last six months, and the legal status has become clear. The mining side is running into power consumption cost as a limit. Bitcoin isn't a new thing any more.

With Bitcoin out of its startup phase, what happens now?  It's starting to look like a niche product, positioned somewhat like gift cards. There are a number of pseudo-currencies like that - airline frequent flyer miles, all those "reward point" schemes, and the big array of prepaid cards available at retail outlets. They're just little convenience things; they have no significant impact on the financial system. It looks like that's where Bitcoin is settling.

The big players can easily solve the confirmation time problem. Coinbase just needs to contract with the big mining pools for priority for getting their transactions into the next block. Then, as soon as they've submitted a transaction to the queue at each big miner, had it checked against the queue for a double spend, and received confirmation that it's in the queue, they're protected against double spending. The big mining pools that have more than half the hash rate can confirm a transaction themselves.

The public blockchain can catch up later.

[Bitfury Mining Center]

Bitfury Mining Center from Data Center Knowledge

"Bitcoin mining operations are expected to spend at least $600 million to deploy infrastructure in the second half of 2014."

Fears of tough action by Beijing following allegation BOC launders money.

This isn't specifically about Bitcoin, but it's a strong indication that China is not going to loosen exchange controls. It's going to tighten them. "Hurun Report's survey of China's richest people, the percentage of super-rich individuals wanting to emigrate, or who had already done so, hit 64 per cent this year, up from 60 per cent last year." The government of China is determined to keep their super-rich from taking their money with them when they leave.

This has mixed implications for Bitcoin. Legal Bitcoin operations in China are less likely, while illegal ones are more likely.

Mark Karpeles had at least two companies in Japan - Mt. Gox and Tibanne KK. Tibanne is (probably) the parent, with an equity stake in Mt. Gox. Tibanne apparently owned the physical facilities and may have employed the people running Mt. Gox.

Currently, Mt. Gox is in liquidation, and there's a bankruptcy trustee in charge there. Nobody seems to be suing Tibanne and Mt. Gox in Japan, trying to pierce the corporate veil, and filing fraud charges.  There's a reasonable chance that some of the money was improperly transferred to Tibanne and/or Karpeles personally, which is a good reason to sue.

Sunlot was working with Karpeles before the bankruptcy; they're not going to do this.