Bitcoin briefly dropped 25-30% today, and is now down about 15% from the peak. We'll probably see some recent speculators seeing a top, exiting the market, and demanding their money tomorrow. It will be interesting to see which exchanges pay up and which don't.

One angry, rich investor going after Mt. Gox with lawyers and regulators in Japan could bring down the whole house of cards in a hurry.

That is theft. Money transfer companies in the US or Japan are not allowed to do that. Funds on deposit belong to the customer, not the exchange. Not "are owed to", but "belong to". This the difference between going bankrupt and going to jail. For Japan, read the Payment Services Act. I don't know about Slovenia or Romania.

This is why fractional reserve banks are regulated, have capital requirements, and are backed up by deposit insurance.  For why, see Emergency Banking Act in Wikipedia.

Technical solutions have been proposed, but not implemented.  See Scalability. Without them, the Bitcoin network maxes out around 7 transactions per second, and lately traffic has bumped against that limit during busy periods. Scaling up requires cooperation from the big mining pools. Higher fees benefit miners. Whether they want to do more work for less money is a big question.

Some people have suggested using unconfirmed Bitcoins for small transactions, but that's a headache. Coinbase only buys "confirmed" Bitcoins. Read their blog as to why. It's not so much a rip-off problem as a problem with downstream transactions getting stuck because there's an unconfirmed input.

Coinbase's business is to provide a way for Bitcoin retailers to accept payment without taking a risk on the price of Bitcoins dropping. Bitcoin dropped 25%-30% today, then partially recovered. If you're a goods retailer with a 15% markup, you don't want to be exposed to a big drop like that. So if Coinbase insists on confirmed coins only, that sort of sets the pattern for Bitcoin retail.

It's taken much longer than I expected for the irrational exuberance to subside.

What still hasn't happened is substantial use of Bitcoins for buying real-world goods. This last runup is because Bitcoin can be used to get around exchange restrictions in China. There's still little non-speculative use. (Satoshi Dice does not count as "non-speculative")

Right now, Bitcoin Charts shows all exchanges headed down.

We have an interesting event coming up - on the next downturn, many new speculators will cash out and will demand money from exchanges. Some of the exchanges aren't going to make it.

That's an important point. At some point, there will be profit-taking. The Bitcoin "exchanges" will suddenly be required to pay out sums in excess of a billion dollars.  Mt. Gox has trouble paying out much of anything, and some of the other exchanges are flaky.

Think about this. We have unregulated "exchanges" run by anonymous parties holding huge sums, which they may have to pay out.  Historically, over half of Bitcoin exchanges have failed, usually taking the money. How many will actually pay up when it's time to wire transfer a few hundred million dollars?

So take them to court. They're in San Francisco.

It's also possible that Kraken is just a reboot of Tradehill. Both use the same cheezy mailbox store on Market St. in San Francisco.

Bitcoin is starting to hit scaling problems. Look at Mt. Gox Bitcoin transactions unconfirmed after 2 hours. 155 in the queue right now, but numbers from 400 to 1000 have been seen. Also look at average transaction confirmation time. During busy periods, it's been spiking up lately. There's now enough transaction volume to temporarily saturate the network. This isn't happening all the time, but it is happening frequently now.  Mt. Gox has been getting complaints about how long it takes to confirm transactions, so they've bumped up their fee to the point that theirs should get through.

Many of the mining pools are only generating 250K blocks as a default. The Bitcoin client can be configured for bigger blocks, but it doesn't have to be. There are negative incentives to miners in making their blocks bigger - their confirmations slow, and there's a risk of an orphan block.   This is slowing confirmations. A bigger fee can get your transaction confirmed sooner.  See https://bitcointalk.org/index.php?topic=339505.0

Kraken is iffy. They are registered with FinCen, but that's just a form. Their street address is a mail drop in San Francisco, and it's the same mailbox store Tradehill used.  I suspect that there's some connection between Tradehill and Kraken, but don't know what it is.

That's a big problem with Bitcoin. Over half of all Bitcoin exchanges have already tanked. Usually, the depositors don't get their money back. With that track record, any withdrawal delays are a big red flag.

Bter is displaying typical early-stage exchange failure behavior - delays in withdrawals, followed by vague excuses. Notice that the excuses do not contain anything like "we will be back in full operation by (date/time)", or any solid data like "we are now 34 hours behind in processing transactions". No, it's just vague excuses. 

And, as usual, many of the marks are insisting nothing is wrong.

That's something "blockchain.info" could compute. There's a list of Mt. Gox transactions not confirmed for 2 hours, which indicates that the fee required to get a transaction through in less than 2 hours is at least 0.001 BTC.

Processing time and transaction costs are becoming a real issue. Here's the current list of Mt. Gox transactions not confirmed for 2 hours. No-fee transactions take a long time, and now, so do 0.001BTC fee transactions.  It looks like the fee required to get fast processing is now 0.002BTC, or about $0.42.

Processing a debit card transaction via ACH typically costs $0.34 for a small merchant, and you get a confirmation in seconds.

Bitcoin is too slow for retail.

"Kraken" is a DBA name for Payward Ventures, Inc, incorporated in Delaware in October 2013.

They are registered with FinCen. But that just means they filled out the form.

They are not known to Dun and Bradstreet or Find the Company. Their SSL cert is from a hosting company, Cloudflare.

Their street address that they gave to FinCen is 548 Market Street #39656, San Francisco, CA, 94104.
That address is a mail drop, "Earth Class Mail". This is the same mail drop place that Tradehill used before they shut down. That's a bit suspicious.

Persons said be associated with Kraken: Jesse Powell, CEO.  Michael Gronager, COO.  Constance Choi, general counsel.

Constance Choi has a reasonable reputation. She's an licensed attorney in California and works for     Kirkland & Ellis, which is a major law firm.

Almost nobody is accepting Bitcoins for products that don't have huge markups. Look in "Goods". It's like reading Craigslist. Keychains, necklaces, old stamps, books, games, and coins, "Fake G-Shock Watches" (Why? Real ones are only about $50), and other garage-sale junk.  Plus various Bitcoin-related items. Also silver and gold, just the thing to buy from an anonymous party using an irrevocable money transfer, and usually being sold at a big markup.

Take a look at BitPay's merchant list. It's mostly stuff that doesn't cost much, if anything, to make, has a huge markup, or is drug-related. T-shirts, stock graphics, web hosting, etc. Bitcoinshop.us has real products like laptops, but the first product they list, an "ASUS G750JX-DB71 17.3-Inch Laptop (Black)" is ฿2.4559, (times Bitstamp price of $825/BTC = $2026). Amazon offers that at $1,808.98.

That's what Bitcoin retail looks like. Lame.

Bitcoin just isn't being used seriously as a currency.

There was a transient overload, with over 1000 transactions listed on http://skanner.net/MtGox/mtgox_tx.php. But right now, there are only 174 pending for more than 2 hours.  None have a fee larger than 0.001 BTC. Most of the stuck transactions are no-fee transactions.

Here's a live list of Mt. Gox Bitcoin transactions stuck waiting for confirmation for more than 2 hours:
http://skanner.net/MtGox/mtgox_tx.php

There's a huge backlog of "no fee" transactions.   It looks like 0.001 BTC isn't enough to consistently get a transaction through, but 0.002 BTC is. So it now costs about $1 to do a Bitcoin transaction.

Bitcoin has now been priced out of the micropayments business. It's too expensive for, say, an iTunes track or a video rental.

Not the businesses that use Bitcoins for transactions.  Just the exchanges, brokers, and dealers. The ones that handle other people's money. Over half the Bitcoin exchanges have failed, taking customer funds with them.

This hearing probably is a lose for the shadier exchanges. With all the major US regulators indicating that they have no fundamental problem with Bitcoin, attention will be focused on the bad actors. Like Mt. Gox not paying out customer funds.

That's a vote on the House floor. Bells ring and indicator lights come on all over the Capitol when the members are called to vote. Has nothing to do with what the committee is doing.

"Circle Internet Financial"? "Jeremy Allaire", their CEO, is speaking. They were established three weeks ago. They have $9 million in capital from a VC.

Pedo guy just finished: "There is a secret Internet for drug deals, assassins, and child pornography".
But then he says that the US shouldn't push virtual currencies underground and offshore to uncooperative governments. "Absolute Internet anonymity is a prescription for catastrophe."

The FinCen person didn't seem too worried about Bitcoin.

Up now, the Bitcoin Foundation speaker.

A few minutes later, we have

Mt Gox USD  latest 635.00001  bid 602  ask 605.61

These numbers look bogus. The trade history doesn't agree with the summary. The actual trades in the last few minutes have been in the 633-644 range.