16 ms·

Venezuelans turn to Bitcoins to bypass currency controls

174 points by rafaelm 12y ago

bsbechtel 12y ago
This is why I think a lot of VCs are investing in the Bitcoin space, and I why I think there is an extremely bright future for the currency. Many economists (i.e., Paul Krugman) can't get past the idea that a currency needs to be backed by a state to be a real currency. That's the most ridiculous claim ever...currencies existed long before nation-states ever did. Events like this are proving those economists wrong.
- IvyMike 12y ago
  > Paul Krugman [...] can't get past the idea that a currency needs to be backed by a state to be a real currency. I've not read everything he's said on bitcoin, but I've never seen him explicitly make that argument. Do you have a link?
  - spikels 12y ago
    Krugman hasn't been that clear about why he doesn't like bitcoin. Apparently he mostly does not like it because it is favored by Libertarians. He has endorsed the views of Brad Delong (an econ blogger with similar views and style) that a currency needs to be backed by a taxing authority and/or central bank (i.e. a government): http://krugman.blogs.nytimes.com/2013/12/28/bitcoin-is-evil http://krugman.blogs.nytimes.com/2013/12/28/bitcoin-is-evil
    - dragonwriter 12y ago
      You're not reading very carefully. The argument De Long makes in the excerpt that Krugman endorses is not that "a currency needs to be backed by a taxing authority and/or central bank", it is that, for a commodity (currency or not) to serve as a stable store of value, it must have something providing both a ceiling and floor for its value, and one of those (the floor) is not immediately apparent for bitcoin. This is very different from your argument about government, as is evidenced by the fact that his two counterexamples of things where the ceiling/floor combination are available and specifically identified are the US dollar (a government-issued currency) and gold (a commodity which is not backed by a taxing authority and/or central bank.)
      - Torgo 12y ago
        Actually I think he is right and you are wrong in this case. The section of DeLong's essay that Krugman quotes in his article though is the claim that Bitcoin was designed as a weapon against government central banks and their ability to tax, and to monitor citizen financial transations. The article "Bitcoin is Evil" was written not to ask "does bitcoin work" but "is bitcoin morally bad or good?" And Krugman says "bad" because he believes it would undermine the government's ability to use monetary policy to achieve various goals.
        dragonwriter 12y ago
        > The section of DeLong's essay that Krugman quotes in his article though is the claim that Bitcoin was designed as a weapon against government central banks and their ability to tax No, the section of DeLong's writing that Krugman quoted didn't deal with that, it dealt with the ceiling/floor issue I described; this was in the section of Krugman's piece discussing the postivist evaluation of bitcoin's ability to function as a stable store of value. What you seem to be describing is the excerpt of Charlie Stross's work that Krugman quotes in the shorter bit at the end where Krugman is discussing normative evaluation of bitcoin's purposes. Charlie Stross and Brad DeLong are two different people, and Krugman cites them for very different purposes. (One about bitcoin's purpose and one about bitcoin's functional properties.)
- sputknick 12y ago
  Agreed. This is where bitcoin matters. It isn't that big a deal to those of us who live in a free country with a stable government, a stable currency and a readily available banking system. But to people who don't have those things, bitcoin offers freedom and prosperity.
- pessimizer 12y ago
  A currency just has to be backed by something. Money laundering is something. Drug trafficking is something. The fact that Venezuelans are using it to launder money is not "proving those economists wrong", it's making those economists wrong. And the more mainstream it gets, and the more tracked it gets, and the harder it gets to buy what you want with it without leaving some sort of record, the more it reverts to its natural value of zero.
  - cesarb 12y ago
    One use for Bitcoin is "Paypal replacement". There are situations where that use being traceable is not a problem; for instance, I have no problem making public the fact that I pay for a LWN.net subscription, and in fact, the LWN.net site itself reveals it every time I post a comment there. Therefore, if what you are saying is valid, Bitcoin's natural value is above zero.
- aba_sababa 12y ago
  I agree with you in that this is an excellent and demonstrably valuable use case for Bitcoin - we saw the same thing happen in Cyprus with the protests there. I don't think I agree about this meaning there will be a bright future for it. Venezuela and Cyprus are unstable, extremely corrupt governments. Bitcoin thrives in that environment. A bet on Bitcoin seems to be a bet that those kinds of environments will endure and are inevitable, which is vaguely reminiscent of 2nd Amendmenters and the way they want their guns because it'll help them defend against the "corrupt, evil police state". The problem is that America isn't actually a corrupt, evil police state and neither is it truly on the verge of imploding. I would bet against Bitcoin, at least in America, for this reason.
  - sunshinerag 12y ago
    "The problem is that America isn't actually a corrupt, evil police state ..." ... is it?
  - jMyles 12y ago
    > America isn't actually a corrupt, evil police state I won't say evil, because I think most problems in government are attributable to incompetence, but I think it's a plenty corrupt police state.
    - cbd1984 12y ago
      OK, define "police state".
- mpyne 12y ago
  > can't get past the idea that a currency needs to be backed by a state to be a real currency. That's the most ridiculous claim ever...currencies existed long before nation-states ever did. I think if you examine those economists' arguments further, you'll see it doesn't have as much to do with "OMG where's the state???!" as you seem to think. As you yourself point out, economies have worked since long before nation-states have existed, so maybe the Bitcoin evangelists might want to recognize that being "like gold but with bits" doesn't change all the economic rules.
  - shit_parade 12y ago
    Nixon took the US off the gold standard, fiat currency controlled by central banks is the real new experiment.
    - mpyne 12y ago
      FDR took the larger U.S. international economy off the gold standard in 1933, so if "bank-controlled fiat" isn't exactly "new". And even that is a highly American-centric POV; other economies have worked on bank controls and fiat long before the U.S. even existed, including China in the 11th century and England starting from the 12th century.
cjensen 12y ago
That's interesting, but I'm pretty sure a physical dollar bill is more useful. A physical dollar can be used to make purchase stuff locally without a computer, and is easily accepted for a sale. In the example given in the article, the only reason the first guy in the article uses bitcoins is to buy an Amazon gift certificate (denominated in dollars) to buy stuff mail order. The only real lesson to be had from the Venezuela situation is that far-left governments suck at basic economics and math. There is no lesson to be had about bitcoins in this situation.
- SpaceManNabs 12y ago
  The issue is that they are lacking physical dollar bills. Might as well try all venues. It shows that bitcoins can help alleviate currency demand. As others have commented, bitcoin adoption is steadily going up.
- imaginenore 12y ago
  Is there lack of computers? Everyone has a smartphone these days. And bitcoin works over SMS, so you don't even need a smartphone.
  - icebraining 12y ago
    Everyone has a smartphone these days. In Venezuela? Are you sure?
- celticninja 12y ago
  So do far right governments. It's almost as if we need a sort of middle ground.
  - eru 12y ago
    Or more dimensions?
Max_Mustermann 12y ago
FWIW Venezuelans on reddit and other internet forums are very skeptic about this. They say it's just a more convoluted way to get USD. http://redd.it/2iocr5 http://redd.it/2iocr5
joosters 12y ago
Not long ago, it was the Chinese who were apparently using Bitcoin to bypass currency controls, and that was to be the 'big thing' that would propel bitcoin on to greatness. Now that effect seems to have petered out and the hype has switched countries... why will it be any different this time?
- mrb 12y ago
  Bitcoin's adoption continues to increase. Make no mistake about this. It is far from having "petered out": http://avc.com/2014/10/bitcoin-adoption-metrics/ http://avc.com/2014/10/bitcoin-adoption-metrics/ More and more people in China, Venezuela, etc, are using it to bypass currency controls. The problem was the media was hyping Bitcoin and making it sound like it would become instantaneously popular overnight. Instead, it is a process that will take some time. That is all. If, by "petered out", you were referring to the current downtrend in price, well IMHO the explanation is much simpler: Bitcoin users are just selling coins to pay their income taxes, before the IRS deadline of October 15, 2014. My reasoning is as follow: (1) a lot of Bitcoin users are American, so they fall under IRS U.S. tax laws (2) most users realized incredible gains during the 2013 tax year: Bitcoin went up 5700% from $13 to $750 between January 1 and December 31 (3) 2013 was the first year for which the IRS published official Bitcoin guidelines (http://www.irs.gov/pub/irs-drop/n-14-21.pdf http://www.irs.gov/pub/irs-drop/n-14-21.pdf), thereby enticing many users to pay taxes (and no, unlike what the media like to say, a lot of us are not anti-government anti-tax punks - we like to stay legal, pay taxes, and legitimize Bitcoin) (4) because a lot of Bitcoin users became "accidentally" Bitcoin-rich (with little or just a normal amount of other USD-based assets), they have no choice but to sell coins to pay taxes on their Bitcoin gains Let me tell you I experienced this first-hand: I filed for a tax extension to pay on October 15 instead of April 15. I knew my taxes would probably be around $100,000, and when my accountant was done (a few weeks ago), it was indeed about $100,000 in taxes. I had always been planning to sell coins to cover this amount, but seeing how much BTC lost value in the last weeks/months, I decided to scramble and use money from elsewhere to pay for the taxes. But I am sure that many other Bitcoin users don't have a financial cushion to be able to pay a bunch of taxes at the last minute. That's why I theorize the current downtrend is caused by people selling coins to pay for taxes. In fact, if my theory is right, there should have been a dip around the time of the first deadline for those who did not apply for an extension (and had to sell coins to pay taxes by April 15), and there WAS one exactly at this time! In fact I predicted this dip back in April: https://plus.sandbox.google.com/100577178258662783679/posts/UyfTAqPQXua https://plus.sandbox.google.com/100577178258662783679/posts/...
narrator 12y ago
Bitcoin isn't a bad way to save money if you can't set up an offshore bank account. Sure beats the local currency.
- GFK_of_xmaspast 12y ago
  How far off its peak is it again? 75%?
  - imaginenore 12y ago
    The dollar is around 99% down off its peak. So? Yo just chose some arbitrary timeline that bitcoin looks bad at. That's bad logic.
    - anigbrowl 12y ago
      Not year-on-year it's not.
      - tsotha 12y ago
        Well, sure, but how do bitcoins look if you go back two years?
      - oleganza 12y ago
        Year-over-year bitcoin is up approx. 300% as of today. In fact, it was 90% of the time in the past 5 years up YOY, except for 5-6 months after 2011th bubble.
        anigbrowl 12y ago
        I'm pretty sure that won't be true in 6 weeks time.
  - tsotha 12y ago
    Which would make it a far better choice than the local currency.
natrius 12y ago
People have figured out how to hold stable value on blockchains by using them to issue contracts for difference. You can acquire a token that maintains the same value as the dollar, backed by people betting on price changes between the dollar and the blockchain's internal currency. Volatility isn't a drawback of cryptocurrencies anymore, and it's going to be entertaining when countries with capital controls discover this.
- hhm 12y ago
  Any sources about this? I hadn't heard about this before.
  - markkat 12y ago
    Bitshares does this: http://bitshares.org/ http://bitshares.org/ Their BITUSD has been tracking fairly well: http://www.cryptocoincharts.info/pair/bitusd/usd/bter/1-month http://www.cryptocoincharts.info/pair/bitusd/usd/bter/1-mont...
    - hhm 12y ago
      Thanks
- themodelplumber 12y ago
  >and it's going to be entertaining when countries with capital controls discover this How would you explain that to a high school art student? (Please)
  - innguest 12y ago
    That means e.g. Venezuelans would be able to instantly drop out of the Bolivar and get into a stable currency, therefore instantly bringing about the tail end of hyperinflation, which drops the value of the Bolivar to zero - because now not only does no one want it (as is the status quo in real life), but also no one has it, which is what Venezuela currently has control over (by not letting people freely get out of the Bolivar).
josu 12y ago
The problem here is that nobody wants Bolívars (the Venezuelan currency), since it's almost imposible to convert them back to USD or any other currency. A sales manager for Marriot was telling me that in Caracas they charge 40$ a night if you pay with USD or 300$ if you pay with bolívars. So the only people that would be willing to exchange bitcoins for bolívars would be people who live in Venezuela. So I assume that supply of bitcoins in Venezuela is really scarce, and their price should be on pair with black market dollars, so probably 6-7x the international price. The only way around this would be if Venezuelans were to mine their own bitcoins, but given that most of the mining equipment is sold either in USD or BTC, it's just a catch 22. So no, there is no bitcoin economy in Venezuela and as long as they keep their strict capital controls in place, there won't be any kind of economy in Venezuela.
- harry8 12y ago
  The point is you get a fair, unregulated, market exchange rate of Bolivars to USD (or Euro or Yuan or whatever) via bitcoin currency. At whatever that rate is based on supply and demand and you can transact at that rate. Currency controls mean "we the govt. say our currency is worth x USD and you must transact at that rate" which kills the market and means zero USD sellers. I'd expect the USD to Bolivar rate via bitcoin to be significantly more Bolivar to USD than the "official" rate. In a sense this is nothing especially new in markets. You could always get a wildly more favourable rate for your USD behind the iron curtain on the black market. Local currency is worth something, people will take it at some value. Even zimbabwe, just add a bunch of zeroes...
  - jfroma 12y ago
    Exactly, in Argentina the situation is similar. The problem is that no body wants bolivar (or pesos) at the official rate because is unfair. Bitcoin can help to make that more fair and here is an example. An example is a person that works for a company abroad from Venezuela . If he does what is supposed to do, he will get paid in dollars but with a wire transfer but the local bank gives bolivar at the official rate only and won't be able to buy dollars back. On the other hand there is always another person that needs to get dollars, to travel or to pay something. One way to solve this issue is with Bank accounts abroad, the first person get paid on an account in a bank outside Venezuela, then he wire to the second person acc abroad. In exchange the second person pay in bolivar at a good rate to the first one. In the black market it sometimes call "wire dollar" or cable dollar. Bitcoin can makes this easier because is more tangible, you can meet someone at any place and move the bitcoins from phone. It requires less trust between the parties. The money always go where it wants to go, there is no way to regulate.
kolev 12y ago
Is this why the price dropped so much? Increased demand? :D
dghughes 12y ago
I recall on the William Shatner sci-fi TV series TekWar people used what looked like USB thumbdrive which they connected to share credits. Too bad Bitcoin couldn't be used that way without a smartphone, something simple and no risk if stolen.
- wyager 12y ago
  >Too bad Bitcoin couldn't be used that way without a smartphone, I think the minimal secure interface is something like a Trezor, which is pretty similar to what you describe. Anything without some kind of confirmation UI can't possibly be secure.
climber_mac 12y ago
I am from Venezuela. In case you are wondering how terrible the Venezuelan economy is right now, think about this: Our biggest denomination bill (100 Bolivares) is not enough to buy $1 USD [1]; in january 2013 you could buy $14 USD for the same amount. Also think about the fact that Venezuela has the largest proven oil reserves in the world [2]. I'm not even going to try to explain the currency exchange and control mechanisms (CADIVI and SICAD), they are basically operating like a lottery to select people who will be allowed to buy dollars at the official government rate. Everyone turns to the black market, but the demand is extremely high, and the supply barely exists. Bitcoin won't solve our problems because no one will want to sell for Bolivares. The bolivar has been devaluated twice in the past two years, which has decreased it's value by more than 50% when compared to 2013. Sources: [1] https://dolartoday.com/ https://dolartoday.com/ [2] http://en.wikipedia.org/wiki/List_of_countries_by_proven_oil_reserves http://en.wikipedia.org/wiki/List_of_countries_by_proven_oil...
- swalsh 12y ago
  would they sell "things" for bitcoins?
  - climber_mac 12y ago
    But what is there to sell? Every industry has received incredible shock from the economic situation, there are no dollars to import material goods from the outside so that they can support themselves. Besides, I can't think of anything other than oil that others would be interested in buying. Not sure if I understood your question correctly, sorry if this doesn't answer it!
- imaginenore 12y ago
  > because no one will want to sell for Bolivares What about tourists? You should encourage tourists to bring bitcoins.
  - climber_mac 12y ago
    Tourists generally don't go to Venezuela because the country is extremely unsafe. The capital, Caracas, is ranked as the second city with the highest murder rate in the world [1]. There is an extremely low regard for life - petty criminals will kill you for your phone. However, we do have some of the most unreal places on the planet! [2] [1] http://www.theguardian.com/world/2014/jan/12/violent-crime-makes-venezuela-dangerous http://www.theguardian.com/world/2014/jan/12/violent-crime-m... [2] http://1.bp.blogspot.com/-4ghbtqN0bRY/TyV8kLJVivI/AAAAAAAABXU/BOO5nBIrLfY/s1600/angel.png http://1.bp.blogspot.com/-4ghbtqN0bRY/TyV8kLJVivI/AAAAAAAABX...
nyolfen 12y ago
once again bitcoin proves its primary utility is crime
totoroisalive 12y ago
"Insignificant percentage of Venezuelan turn to Bitcoins to bypass currency controls." That is a more accurately title.

174 points by rafaelm 12y ago

This is why I think a lot of VCs are investing in the Bitcoin space, and I why I think there is an extremely bright future for the currency. Many economists (i.e., Paul Krugman) can't get past the idea that a currency needs to be backed by a state to be a real currency. That's the most ridiculous claim ever...currencies existed long before nation-states ever did. Events like this are proving those economists wrong.

IvyMike 12y ago
> Paul Krugman [...] can't get past the idea that a currency needs to be backed by a state to be a real currency. I've not read everything he's said on bitcoin, but I've never seen him explicitly make that argument. Do you have a link?
- spikels 12y ago
  Krugman hasn't been that clear about why he doesn't like bitcoin. Apparently he mostly does not like it because it is favored by Libertarians. He has endorsed the views of Brad Delong (an econ blogger with similar views and style) that a currency needs to be backed by a taxing authority and/or central bank (i.e. a government): http://krugman.blogs.nytimes.com/2013/12/28/bitcoin-is-evil http://krugman.blogs.nytimes.com/2013/12/28/bitcoin-is-evil
  - dragonwriter 12y ago
    You're not reading very carefully. The argument De Long makes in the excerpt that Krugman endorses is not that "a currency needs to be backed by a taxing authority and/or central bank", it is that, for a commodity (currency or not) to serve as a stable store of value, it must have something providing both a ceiling and floor for its value, and one of those (the floor) is not immediately apparent for bitcoin. This is very different from your argument about government, as is evidenced by the fact that his two counterexamples of things where the ceiling/floor combination are available and specifically identified are the US dollar (a government-issued currency) and gold (a commodity which is not backed by a taxing authority and/or central bank.)
    - Torgo 12y ago
      Actually I think he is right and you are wrong in this case. The section of DeLong's essay that Krugman quotes in his article though is the claim that Bitcoin was designed as a weapon against government central banks and their ability to tax, and to monitor citizen financial transations. The article "Bitcoin is Evil" was written not to ask "does bitcoin work" but "is bitcoin morally bad or good?" And Krugman says "bad" because he believes it would undermine the government's ability to use monetary policy to achieve various goals.
      - dragonwriter 12y ago
        > The section of DeLong's essay that Krugman quotes in his article though is the claim that Bitcoin was designed as a weapon against government central banks and their ability to tax No, the section of DeLong's writing that Krugman quoted didn't deal with that, it dealt with the ceiling/floor issue I described; this was in the section of Krugman's piece discussing the postivist evaluation of bitcoin's ability to function as a stable store of value. What you seem to be describing is the excerpt of Charlie Stross's work that Krugman quotes in the shorter bit at the end where Krugman is discussing normative evaluation of bitcoin's purposes. Charlie Stross and Brad DeLong are two different people, and Krugman cites them for very different purposes. (One about bitcoin's purpose and one about bitcoin's functional properties.)
sputknick 12y ago
Agreed. This is where bitcoin matters. It isn't that big a deal to those of us who live in a free country with a stable government, a stable currency and a readily available banking system. But to people who don't have those things, bitcoin offers freedom and prosperity.
pessimizer 12y ago
A currency just has to be backed by something. Money laundering is something. Drug trafficking is something. The fact that Venezuelans are using it to launder money is not "proving those economists wrong", it's making those economists wrong. And the more mainstream it gets, and the more tracked it gets, and the harder it gets to buy what you want with it without leaving some sort of record, the more it reverts to its natural value of zero.
- cesarb 12y ago
  One use for Bitcoin is "Paypal replacement". There are situations where that use being traceable is not a problem; for instance, I have no problem making public the fact that I pay for a LWN.net subscription, and in fact, the LWN.net site itself reveals it every time I post a comment there. Therefore, if what you are saying is valid, Bitcoin's natural value is above zero.
aba_sababa 12y ago
I agree with you in that this is an excellent and demonstrably valuable use case for Bitcoin - we saw the same thing happen in Cyprus with the protests there. I don't think I agree about this meaning there will be a bright future for it. Venezuela and Cyprus are unstable, extremely corrupt governments. Bitcoin thrives in that environment. A bet on Bitcoin seems to be a bet that those kinds of environments will endure and are inevitable, which is vaguely reminiscent of 2nd Amendmenters and the way they want their guns because it'll help them defend against the "corrupt, evil police state". The problem is that America isn't actually a corrupt, evil police state and neither is it truly on the verge of imploding. I would bet against Bitcoin, at least in America, for this reason.
- sunshinerag 12y ago
  "The problem is that America isn't actually a corrupt, evil police state ..." ... is it?
- jMyles 12y ago
  > America isn't actually a corrupt, evil police state I won't say evil, because I think most problems in government are attributable to incompetence, but I think it's a plenty corrupt police state.
  - cbd1984 12y ago
    OK, define "police state".
mpyne 12y ago
> can't get past the idea that a currency needs to be backed by a state to be a real currency. That's the most ridiculous claim ever...currencies existed long before nation-states ever did. I think if you examine those economists' arguments further, you'll see it doesn't have as much to do with "OMG where's the state???!" as you seem to think. As you yourself point out, economies have worked since long before nation-states have existed, so maybe the Bitcoin evangelists might want to recognize that being "like gold but with bits" doesn't change all the economic rules.
- shit_parade 12y ago
  Nixon took the US off the gold standard, fiat currency controlled by central banks is the real new experiment.
  - mpyne 12y ago
    FDR took the larger U.S. international economy off the gold standard in 1933, so if "bank-controlled fiat" isn't exactly "new". And even that is a highly American-centric POV; other economies have worked on bank controls and fiat long before the U.S. even existed, including China in the 11th century and England starting from the 12th century.

cjensen 12y ago

That's interesting, but I'm pretty sure a physical dollar bill is more useful. A physical dollar can be used to make purchase stuff locally without a computer, and is easily accepted for a sale. In the example given in the article, the only reason the first guy in the article uses bitcoins is to buy an Amazon gift certificate (denominated in dollars) to buy stuff mail order. The only real lesson to be had from the Venezuela situation is that far-left governments suck at basic economics and math. There is no lesson to be had about bitcoins in this situation.

SpaceManNabs 12y ago
The issue is that they are lacking physical dollar bills. Might as well try all venues. It shows that bitcoins can help alleviate currency demand. As others have commented, bitcoin adoption is steadily going up.
imaginenore 12y ago
Is there lack of computers? Everyone has a smartphone these days. And bitcoin works over SMS, so you don't even need a smartphone.
- icebraining 12y ago
  Everyone has a smartphone these days. In Venezuela? Are you sure?
celticninja 12y ago
So do far right governments. It's almost as if we need a sort of middle ground.
- eru 12y ago
  Or more dimensions?

Max_Mustermann 12y ago

FWIW Venezuelans on reddit and other internet forums are very skeptic about this. They say it's just a more convoluted way to get USD. http://redd.it/2iocr5 http://redd.it/2iocr5

joosters 12y ago

Not long ago, it was the Chinese who were apparently using Bitcoin to bypass currency controls, and that was to be the 'big thing' that would propel bitcoin on to greatness. Now that effect seems to have petered out and the hype has switched countries... why will it be any different this time?

mrb 12y ago
Bitcoin's adoption continues to increase. Make no mistake about this. It is far from having "petered out": http://avc.com/2014/10/bitcoin-adoption-metrics/ http://avc.com/2014/10/bitcoin-adoption-metrics/ More and more people in China, Venezuela, etc, are using it to bypass currency controls. The problem was the media was hyping Bitcoin and making it sound like it would become instantaneously popular overnight. Instead, it is a process that will take some time. That is all. If, by "petered out", you were referring to the current downtrend in price, well IMHO the explanation is much simpler: Bitcoin users are just selling coins to pay their income taxes, before the IRS deadline of October 15, 2014. My reasoning is as follow: (1) a lot of Bitcoin users are American, so they fall under IRS U.S. tax laws (2) most users realized incredible gains during the 2013 tax year: Bitcoin went up 5700% from $13 to $750 between January 1 and December 31 (3) 2013 was the first year for which the IRS published official Bitcoin guidelines (http://www.irs.gov/pub/irs-drop/n-14-21.pdf http://www.irs.gov/pub/irs-drop/n-14-21.pdf), thereby enticing many users to pay taxes (and no, unlike what the media like to say, a lot of us are not anti-government anti-tax punks - we like to stay legal, pay taxes, and legitimize Bitcoin) (4) because a lot of Bitcoin users became "accidentally" Bitcoin-rich (with little or just a normal amount of other USD-based assets), they have no choice but to sell coins to pay taxes on their Bitcoin gains Let me tell you I experienced this first-hand: I filed for a tax extension to pay on October 15 instead of April 15. I knew my taxes would probably be around $100,000, and when my accountant was done (a few weeks ago), it was indeed about $100,000 in taxes. I had always been planning to sell coins to cover this amount, but seeing how much BTC lost value in the last weeks/months, I decided to scramble and use money from elsewhere to pay for the taxes. But I am sure that many other Bitcoin users don't have a financial cushion to be able to pay a bunch of taxes at the last minute. That's why I theorize the current downtrend is caused by people selling coins to pay for taxes. In fact, if my theory is right, there should have been a dip around the time of the first deadline for those who did not apply for an extension (and had to sell coins to pay taxes by April 15), and there WAS one exactly at this time! In fact I predicted this dip back in April: https://plus.sandbox.google.com/100577178258662783679/posts/UyfTAqPQXua https://plus.sandbox.google.com/100577178258662783679/posts/...

narrator 12y ago

Bitcoin isn't a bad way to save money if you can't set up an offshore bank account. Sure beats the local currency.

GFK_of_xmaspast 12y ago
How far off its peak is it again? 75%?
- imaginenore 12y ago
  The dollar is around 99% down off its peak. So? Yo just chose some arbitrary timeline that bitcoin looks bad at. That's bad logic.
  - anigbrowl 12y ago
    Not year-on-year it's not.
    - tsotha 12y ago
      Well, sure, but how do bitcoins look if you go back two years?
    - oleganza 12y ago
      Year-over-year bitcoin is up approx. 300% as of today. In fact, it was 90% of the time in the past 5 years up YOY, except for 5-6 months after 2011th bubble.
      - anigbrowl 12y ago
        I'm pretty sure that won't be true in 6 weeks time.
- tsotha 12y ago
  Which would make it a far better choice than the local currency.

natrius 12y ago

People have figured out how to hold stable value on blockchains by using them to issue contracts for difference. You can acquire a token that maintains the same value as the dollar, backed by people betting on price changes between the dollar and the blockchain's internal currency. Volatility isn't a drawback of cryptocurrencies anymore, and it's going to be entertaining when countries with capital controls discover this.

hhm 12y ago
Any sources about this? I hadn't heard about this before.
- markkat 12y ago
  Bitshares does this: http://bitshares.org/ http://bitshares.org/ Their BITUSD has been tracking fairly well: http://www.cryptocoincharts.info/pair/bitusd/usd/bter/1-month http://www.cryptocoincharts.info/pair/bitusd/usd/bter/1-mont...
  - hhm 12y ago
    Thanks
themodelplumber 12y ago
>and it's going to be entertaining when countries with capital controls discover this How would you explain that to a high school art student? (Please)
- innguest 12y ago
  That means e.g. Venezuelans would be able to instantly drop out of the Bolivar and get into a stable currency, therefore instantly bringing about the tail end of hyperinflation, which drops the value of the Bolivar to zero - because now not only does no one want it (as is the status quo in real life), but also no one has it, which is what Venezuela currently has control over (by not letting people freely get out of the Bolivar).

josu 12y ago

The problem here is that nobody wants Bolívars (the Venezuelan currency), since it's almost imposible to convert them back to USD or any other currency. A sales manager for Marriot was telling me that in Caracas they charge 40$ a night if you pay with USD or 300$ if you pay with bolívars. So the only people that would be willing to exchange bitcoins for bolívars would be people who live in Venezuela. So I assume that supply of bitcoins in Venezuela is really scarce, and their price should be on pair with black market dollars, so probably 6-7x the international price. The only way around this would be if Venezuelans were to mine their own bitcoins, but given that most of the mining equipment is sold either in USD or BTC, it's just a catch 22. So no, there is no bitcoin economy in Venezuela and as long as they keep their strict capital controls in place, there won't be any kind of economy in Venezuela.

harry8 12y ago
The point is you get a fair, unregulated, market exchange rate of Bolivars to USD (or Euro or Yuan or whatever) via bitcoin currency. At whatever that rate is based on supply and demand and you can transact at that rate. Currency controls mean "we the govt. say our currency is worth x USD and you must transact at that rate" which kills the market and means zero USD sellers. I'd expect the USD to Bolivar rate via bitcoin to be significantly more Bolivar to USD than the "official" rate. In a sense this is nothing especially new in markets. You could always get a wildly more favourable rate for your USD behind the iron curtain on the black market. Local currency is worth something, people will take it at some value. Even zimbabwe, just add a bunch of zeroes...
- jfroma 12y ago
  Exactly, in Argentina the situation is similar. The problem is that no body wants bolivar (or pesos) at the official rate because is unfair. Bitcoin can help to make that more fair and here is an example. An example is a person that works for a company abroad from Venezuela . If he does what is supposed to do, he will get paid in dollars but with a wire transfer but the local bank gives bolivar at the official rate only and won't be able to buy dollars back. On the other hand there is always another person that needs to get dollars, to travel or to pay something. One way to solve this issue is with Bank accounts abroad, the first person get paid on an account in a bank outside Venezuela, then he wire to the second person acc abroad. In exchange the second person pay in bolivar at a good rate to the first one. In the black market it sometimes call "wire dollar" or cable dollar. Bitcoin can makes this easier because is more tangible, you can meet someone at any place and move the bitcoins from phone. It requires less trust between the parties. The money always go where it wants to go, there is no way to regulate.

kolev 12y ago

Is this why the price dropped so much? Increased demand? :D

dghughes 12y ago

I recall on the William Shatner sci-fi TV series TekWar people used what looked like USB thumbdrive which they connected to share credits. Too bad Bitcoin couldn't be used that way without a smartphone, something simple and no risk if stolen.

wyager 12y ago
>Too bad Bitcoin couldn't be used that way without a smartphone, I think the minimal secure interface is something like a Trezor, which is pretty similar to what you describe. Anything without some kind of confirmation UI can't possibly be secure.

climber_mac 12y ago

I am from Venezuela. In case you are wondering how terrible the Venezuelan economy is right now, think about this: Our biggest denomination bill (100 Bolivares) is not enough to buy $1 USD [1]; in january 2013 you could buy $14 USD for the same amount. Also think about the fact that Venezuela has the largest proven oil reserves in the world [2]. I'm not even going to try to explain the currency exchange and control mechanisms (CADIVI and SICAD), they are basically operating like a lottery to select people who will be allowed to buy dollars at the official government rate. Everyone turns to the black market, but the demand is extremely high, and the supply barely exists. Bitcoin won't solve our problems because no one will want to sell for Bolivares. The bolivar has been devaluated twice in the past two years, which has decreased it's value by more than 50% when compared to 2013. Sources: [1] https://dolartoday.com/ https://dolartoday.com/ [2] http://en.wikipedia.org/wiki/List_of_countries_by_proven_oil_reserves http://en.wikipedia.org/wiki/List_of_countries_by_proven_oil...

swalsh 12y ago
would they sell "things" for bitcoins?
- climber_mac 12y ago
  But what is there to sell? Every industry has received incredible shock from the economic situation, there are no dollars to import material goods from the outside so that they can support themselves. Besides, I can't think of anything other than oil that others would be interested in buying. Not sure if I understood your question correctly, sorry if this doesn't answer it!
imaginenore 12y ago
> because no one will want to sell for Bolivares What about tourists? You should encourage tourists to bring bitcoins.
- climber_mac 12y ago
  Tourists generally don't go to Venezuela because the country is extremely unsafe. The capital, Caracas, is ranked as the second city with the highest murder rate in the world [1]. There is an extremely low regard for life - petty criminals will kill you for your phone. However, we do have some of the most unreal places on the planet! [2] [1] http://www.theguardian.com/world/2014/jan/12/violent-crime-makes-venezuela-dangerous http://www.theguardian.com/world/2014/jan/12/violent-crime-m... [2] http://1.bp.blogspot.com/-4ghbtqN0bRY/TyV8kLJVivI/AAAAAAAABXU/BOO5nBIrLfY/s1600/angel.png http://1.bp.blogspot.com/-4ghbtqN0bRY/TyV8kLJVivI/AAAAAAAABX...

nyolfen 12y ago

once again bitcoin proves its primary utility is crime

totoroisalive 12y ago

"Insignificant percentage of Venezuelan turn to Bitcoins to bypass currency controls." That is a more accurately title.