So what happens on Monday morning?

[Two bitcoin exchange operators charged in money laundering scheme]

Two bitcoin exchange operators charged in money laundering scheme

Reuters:

"Federal prosecutors in New York announced charges against Charlie Shrem and Robert Faiella, both operators of bitcoin exchange businesses, for attempting to sell $1 million in the digital currency to users of the underground black market website Silk Road, which was shut down by authorities in September.

According to the charging document, Shrem, 24, chief executive officer of the exchange BitInstant.com, changed cash into bitcoins for Faiella, 52, who ran an underground bitcoin exchange through the username BTCKing on Silk Road's website. The criminal complaint says that Shrem, in addition to knowing that Faiella's business was funneling money into Silk Road, also used Silk Road himself to buy drugs."

[Bitcoincharts at 2013-11-18 12:15]

Bitcoincharts at 2013-11-18 12:15

Something's wrong here. The "latest price" is far outside the bid-ask range. Did the market cross and lock up, or is this just Bitcoincharts being broken again?

This runup is clearly being driven by buying activity from China. BTC China is now the biggest exchange. Bitcoins provide a legal (more or less) way to convert yuan to dollars or euros. (This normally requires permission from the State Administration for Foreign Exchange.)

But why is the runup so fast? Possibly because there aren't enough dollars flowing into the Bitcoin exchanges to satisfy the demand from sellers in China. People in China who want to convert yuan to dollars or euros don't intend to stay in Bitcoins for long. But they don't care what the Bitcoin exchange rate is, only what the yuan-Bitcoin-dollar exchange rate is for the brief period they're in Bitcoins.

Hm.

 

Available from Amazon.

Excerpt:
He straightened his shirt, which was already pressed neatly. “No, Bradley, bitcoins. As I was saying, bitcoins are a cryptocurrency, the most popular of many, and they allow users to send and receive payments over a decentralized encrypted network. They are the future of currency as we know it, so it would in fact behoove you to listen.”

Brad stretched back further in his chair, sneering at the tall, thin, impossibly serious, Atlas. Instead it was Brad’s cheerleader girlfriend Kayleigh who spoke. She sat at the front of the class, and Atlas had to concentrate not to be distracted by her long creamy legs clearly visible to him under the desk.

May be bought with Bitcoins if Bitmit comes back up.

(Real book, but only 30 pages.)

[Sue in Delaware.]

Has anyone made a serious attempt to collect from Mt. Gox? There are ways to do this. I don't have any money with them, but I've had to do international collections before, for amounts in high six figures, and I got paid.

Here are some options:

• Sue in Delaware. Mt. Gox has a legal presence in the U.S., in Delaware, as a result of their FinCen filing. So Mt. Gox can be sued there. Delaware has Justice of the Peace courts with jurisdiction up to $15,000. They even have online filing, although you may have to go to Delaware for the trial. Mt. Gox will either have to send someone to trial, or lose by default. You still have to collect on the judgement, but there are ways to do that.
• Hire a collection agency in Japan. This isn't easy across the language barrier, but it's possible. Search with Google for 債権回収サービス ("Debt collection service"). It's useful to use Google Chrome with automatic translation enabled for this. Find a service that mentions that they do commercial collections, not just consumer collections. Here's the Japan Ministry of Justice's list of registered debt collection agencies.. There are ones that are not registered, but some are just Yazuka goons. (Although that might work, this is going to be a high-profile collection, and they don't want the visibility.) There are U.S. companies which claim they can collect in Japan, but most don't actually have a presence in Japan. Unless a US company has a Tokyo office of their own, they're probably wasting your time. The normal deal is that the collection agency gets a cut of what they collect, but you don't pay anything up front.
• Raise hell in the financial press. Start calling reporters who have written stories about Bitcoin. Call Forbes, the Wall Street Journal, and Bloomberg BusinessWeek. Not just email - call them. Use words like "default" when talking to them.
• File a complaint with the Japan Ministry of Finance under the Payment Services Act. Whether Mt. Gox likes it or not, they fall under the Payment Services Act in Japan, which regulates non-bank money transfer services. Japan has many such services; most of the cell phone companies offer money transfer, for example. They're required to maintain 100% of customer funds in a separate account, and the Financial Services Agency can audit this. The place to start is a Japanese consulate in the US or the Japan External Trade Organization. One of the major functions of consulates, especially ones of countries with big export trade, is to tell people how to deal with cross-border commercial problems.

If Mt. Gox owes you a substantial amount of money, you can make them pay. You don't have to put up with their nonsense. They do not get to determine when and whether they pay up. It doesn't work that way in the real world.

[MtGox Inc]

Mt. Gox, as of June 26, 2013, has registered with FinCen.  Here's their registration data:

The information provided is scant, but here it is:

MSB Registration Number: 31000029348132
Registration Type: Initial Registration
Legal Name: MtGox Inc
Street Address: 615 S Dupont Hwy
City: Dover
State: DELAWARE
Zip: 19901

MSB Activities: Money transmitter, Other

The address given is just a registered agent, "National Corporate Research, Ltd.".  Mt. Gox is now responsible for acting on legal papers sent to that address.

Now that Mt. Gox has a legal presence in the United States, it can be sued in the United States. For small claims, Delaware has a Justice of the Peace Court, with jurisdiction over debt and contract disputes up to $15,000.  The Justice of the Peace Court #7 is in Dover, so they have jurisdiction over Mt. Gox. Hours: 24 hours a day, 7 days a week. Phone 302-739-4554. 

The court has a convenient how-to guide.

In other words, if Mt. Gox owes you money and you're in the US, there's now something you can do about it.

[A prominent business address, situated in London's famous Mayfair district, 14 Hanover Street is a location that’s sure to impress any client.]

Intersango claims to be located at
3RD FLOOR
14 HANOVER STREET
LONDON
ENGLAND
W1S 1YH.

That's just a mail drop.
Here's what's really there:

London Budget Address.
3rd Floor, 14 Hanover Street, Hanover Square,
London W1S 1YH

*A Mailing Address only location*

A prominent business address, situated in London's famous Mayfair district, 14 Hanover Street is a location that’s sure to impress any client.
All mail addressed to you will be forwarded on either daily or weekly.
...
Hanover Street Mailing Address - £49.00 per month

Call 08000 199 944 or email contact@moneypenny.co.uk

[This thing is over.]

I'm amazed at the level of denial here. "Bitcoin will one day rise again like the phoenix." "The price is great the way it is going." "The lower the price gets the more I am considering the possibility that this is intentional." It's far too late for that.  This thing is over.

Again, if you have cash in any of the exchanges, get it out now. None of those guys are audited.

Take a look at all those black bars on Bitcoin Charts.  ExchB's shutdown was the big news today, but several of the little guys have given it up recently as well. We're down to Mt. Gox, Tradehill, and Btc-E now.

Now look at the volumes in dollars.  The standard 0.6% commission rate yields about $8000 per month for Mt. Gox, $810 per month for Tradehill, and $384 a month for Btc-E.  And that's a maximum; many big traders get discounts.
 
Tradehill apparently has a real organization and staff, but revenue is comparable to a half-time job at McDonalds. That can't last. Btc-E, forget it. Mt. Gox has some business in other currencies, but the numbers aren't that big.

The end is in sight.

Is there a historical and current difficulty vs time chart anywhere? "bitcoin.sipa.be" is dead. Thanks.

[Bitcoin/USD, last 3 months.]

Bitcoin/USD, last 3 months. Any questions?

Bitcoin is over. If you're not out, get out. The last ones to leave will be the worst off.

I've been saying for months that this was a speculative bubble, a pyramid scheme. I said that when bubbles pop, they pop all the way. There were replies like "troll" and "hater".  "The bitcoin's value will inevitably increase." (Bazil). "Regular use of Bitcoins will pick up pace, it's inevitable." (Goodlord666). There are still people writing comments like that.

I was right. You were wrong. Now suffer.

At this point, we can write off Bitcoin as a failed experiment. It's worth thinking about how a different distributed digital currency might be made workable. A few problems which have to be solved:

• Mutual mistrust between buyer and seller needs to be supported. This is the toughest problem. Right now, sending Bitcoins is not tied to receiving something in return, and is irrevocable.
• The double-spending check system has to be as least as fast as normal credit card processing. Waiting minutes for the block chain to update is unacceptable.
• Some price stability is needed. Value shouldn't change more than 1% per week, worst case. 1% per month would be better.
• A better way of launching the currency needs to be developed.

There's an approach to mutual mistrust that might work.  First, as with credit cards, there's a need for an "authorize" and a "capture" stage. In the "authorize" stage, A indicates that they intend to send value to B. This locks up the value from other use by A, and B receives a reliable confirmation that A has that value. In the "capture" stage, the value is actually transferred to B. A has to authorize the "capture". 

That's the normal case. The hard cases might work as follows:

• If A does an "authorize", and then does nothing, a "capture" automatically takes place after some number of days. So sellers don't have to nag buyers.
• If B cancels the capture, that's an agreed cancellation of the transaction, and the value becomes available to A again.
• If A does an "authorize" and later cancels before a "capture", the value becomes available to them again after some number of days. This is the tough case, and it puts B at risk of the buyer backing out after shipment of the product. To discourage backing out, when A does this, they are no longer anonymous to B, and B can publicize the cancellation, which affects A's reputation. Also, because cancellations aren't immediate, A's value is tied up for days, so they can't do this too often.

Discuss.

Current price 10.1999, high bid 10.85, low ask 10.88, from BitcoinCharts,
What broke this time?

http://bitcoincharts.com/markets/ is "down for maintenance". They really should avoid doing that during periods of high volatility.

Mt. Gox is behaving strangely, yet again.  Highest bid $10.11, last trade $8.99.

Those clowns at "Global Standard Bank" set a buy and a sell price for Bitcoins every day. Today, they're still buying at $13.51.  However, considering their embarrassing record of phony bank building pictures and calling themselves a "bank" without registering as one, I'd have serious doubts about whether they'd actually take the loss and pay up.

[The last three weeks on Tradehill]

The last three weeks on Tradehill

Here's the last three weeks on Tradehill. Three weeks, because that gets us past the churn from Mt. Gox's problems, and Tradehill, because there's less noise.  On a daily basis, the prices are about the same.

There are no rallies. There are no crashes.  There is just a slow, steady slide.

This is normal post-bubble market behavior. Nothing to be surprised at here.

Bitcoin production is supposed to be about 7200 coins per day, which at $13.75/BTC is currently $99,000. So, right now, it takes about $100,000 a day in new money to keep the price of Bitcoins stable.

We just saw this on the 4th of July. No one was putting much new money into the markets, since it's a US bank holiday, and the price dropped from $15 to $13. The "weekend slump" has been mentioned previously. But it's not because people aren't trading - that's symmetrical. It's because they're not depositing new cash.

How long will the supply of suckers able to collectively put in $100,000 a day hold out?

[get rich quick without risk or hard work.]

A standard list of warning signs of financial fraud, as applied to Bitcoin exchanges.

• (1) Sales Appeal: The hook designed to lure you in is get rich quick without risk or hard work. Above market returns, guarantees, low or no risk, and no effort required are all hallmarks of investment fraud. Investment fraud intentionally appeals to the basic human emotions of fear, greed, and wanting something for nothing so that you will make an irrational decision. Be wary of any salesman who draws out your emotions as part of the sales process. Due diligence is how you remove the emotion and base your decision on facts.
• (2) Obfuscation and Misinformation: Fancy words and successful images are designed to win your trust by creating a façade of sophistication. Techno-babble is designed to intimidate you into not looking behind the facade. Multiple postings on the internet under various aliases are designed to create the appearance of many people involved. Professional images are designed to create trust. Always ask, "Where is the beef?" Never trust the façade, but instead look deeper to find real substance. Due diligence is how you look behind the veneer of obfuscation and misinformation to see if there is any real meat.
• (3) Unverifiable Claims: Secrets of the rich, technological breakthroughs, patent pending formulas, government conspiracy theories,  and inside information are all examples of things that are either hard to verify or not verifiable at all. Never invest based on hollow words alone. Verify all statements and claims with independent third party information. Assume nothing is true until confirmed through due diligence.
• (4) Manipulative Sales Practices: Intimidation, inadequate disclosures, non-traditional payment choices, inadequate diversification or improper asset allocation, encouraging you to invest based on trust, or rushing you into a decision with high pressure sales tactics are all examples of manipulative investment sales practices that deviate from proven professional standards of conduct. Never rush a decision or invest based on emotion. Due diligence will slow the sales process sufficiently to offset manipulative practices.
• (5) Lack Of Transparency: All investment accounts should be registered separately in your name with an independent, third-party custodian, and all transactions in your investment accounts should be fully visible to you on a daily basis either through independent account statements or the custodian's web site. Avoid commingled, pooled funds where the manager has custody and possession and/or account activity statements are generated only by the manager and not by an independent third-party.