Central banks need to hold bitcoins to prevent "A Bitcoin Speculative Attack"

What is a Bitcoin Speculative Attack?

Take for instance there is a rush to purchase bitcoins in Venezuela. This increase in demand will result in a premium for bitcoin in venezuela say $100 above the US market. The result will be speculators rushing in to sell the Bolivars for US dollars to purchase bitcoins. This selloff of the Bolivar will need a response from the government to defend the currency by increasing the interest rate, capital controls or worse.

To fight such speculation the government could sell bitcoins in the market to drive the price down but this would neccessitate the government having access to bitcoins in the first place. The IMF have already discuss contingencies if this scenario should ever eventuate.

At the bottom of it, bitcoin is just Perfect Money. It is accepted all over the world and it can move between borders effortlessly and cheaply. It is a good store of value and over time it's value will always increase secured by the hard limit of 21 million bitcoin to ever exist.

As good money it will always drive out bad. If for any reason the citizens of a country suddenly lose confidence in heir currency perhaps because of hyperinflation through excess money printing, we may get a rush to purchase bicoins to preserve purchasing value.

IMF 'unable' to supply the currency needed to counter speculative attack using bitcoin

Bitcoin Speculative Attack

Central Bank Of Barbados Advised To Holds Bitcoins (Updated 29/11/2015)

Economist Dr Winstone Moore and Jeremy Stephens have produced a report for the Central Bank of Barbados advising the central bank to holds a small amount of bitcoin in their reserve portfolio. Precisely against speculative attacks and mitigate against depreciation of other reserve currencies such as the USD and Euro in their portfolio.

This is an indication of the current climate of thinking all round the world. There is only going to be 21 million bitcoins, ever. If only some of these small nation acted on such advise bitcoin price will escalate exponentially. Only a matter of time when some will make the move.

Singapore's prime minister advises banks and regulators to heed bitcoin and blockchain technology.

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Where Bitcoin - Global Bitcoin Adoption

Current Price Floor (21/11/2015) : $320

The importance of understanding the price floor is to help with investment into the bitcoin space.

Bitcoin price is underpined by it's adoption.
A : Initially 2009 - 2010 it was only the developers like Satoshi where it did not have any value.
B : 2010 - 2011 a small community developed and value was established over forums price of bitcoin was less than a dollar.
C : 2011 - 2012 Mt Gox the first exchange established and the community grew around libetarians and anarchist. Price increased to a few dollars.
D : 2012 - 2013 Silk Road was a unique use case for bitcoin and value exploded to around $30
E : 2013 - Nov 2014 New users and speculators started coming into the space. Mining exploded in popularity and the mining arms race was on. Price increased to around $200.
F : 2014 - July 2015 Bitcoin price went to $1200 but I believe that this was pure speculation and due to events around Mt Gox and should be discounted. Price floor should reasonably be around $230.
G : July 2015 - Nov 2015 MMM Ponzi scheme took off in East Asia new price floor of $300

Awaiting more use case for bitcoin to bring in more users and adopters, which will establish higher price floor for bitcoin.

Bitcoin Embassies Around The World

Physical Businesses Accepting Bitcoins

Infographic of the Bitcoin Ecosystem

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A Watershed Moment For Bitcoin - Singapore Leads The Way

Transcript : "... there are other technologies like Blockchains which is used for bitcoins, but can also be use for many other applications like, Real Gross Time Settlement and Trade Finance Verification. So our banks and our regulators MAS must keep up to date and up to scratch with these developments..."

Real Time Gross Settlement : "Gross settlement" means the transaction is settled on one to one basis without bundling or netting with any other transaction. RTGS systems are typically used for high-value transactions that require immediate clearing, usually by a country's central bank.

and

Trade Finance Verification : Same-day affirmation (SDA) also known as T0 refers to completing the entire trade verification process on the same day that the actual trade took place.

He refers to Blockchains (plural), He points out that there are many type of blockchains and only one of which is bitcoin. This actually sidesteps the previously negative image attributed to bitcoin.

It shows a clear understanding of what blockchain technology is all about. Furthermore he directs that their banks and regulators keep up to date with developments. Singapore have always maintained a level headed approach towards bitcoin. It was the first country to clearly define the legal position of bitcoin. Here regulators treat bitcoin for tax purposes it the way it is used, either as a commodity or currency. This has allowed many innovative bitcoin companies to setup and thrive in Singapore.

In his speech he praised the banking industry for it's success but also points out that there are other banks that are better in other areas of the finance and banking, such as mobile payments. This is reinforcing Singapore's model of always wanting to be the best in areas of industry that they target. Being a financial hub have been part of the plan since the founding of Singapore as an independent state.

I would argue that this is a watershed moment for bitcoin and blockchain technologies in general. The community have always hoped for a country to "adopt" bitcoin. This endorsement from the leader of a major developed nation and a global financial hub comes close.  It is a good bet that a good many leaders have been taken by surprise and are "scrambling for the exits" so to speak.

Update 24/11/2015 : Banks Urged To Take Digital Currencies Seriously

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People In Bitcoin - Movers and Shakers of the Bitcoin World

IN THE BEGINNING...... Satoshi Nakamoto

Everyone who has ever indulge in bitcoin have wondered who this mysterious person is. On 31 August 2008 the bitcoin white paper was published followed by code in January 2009. Satoshi used the internet and an email address to publish, maintain and communicate with the early core developers until his exit in May 2011 when he passed on the mantle of core maintainer to Gavin Andresen. If we step back alittle, it is obvious that this process of introducing and exiting without a trace was planned right from the begining. Otherwise there would have been a slip over the 2 years and there would be a trail to follow towards his discovery.

Can this man be the real Satoshi Nakamoto, Report Wired and Gizmodo

Hal Finney  (Bitcoin & Me)

Nick Szabo

More likely it is more than 1 person and they would have had previous encounters with digital cash. Previous iteration of digital cash such as Digi Cash, Egold and Liberty dollars have all been shut down by the government. Likely candidates are Nick Szabo and Hal Finney, though Adam Back's hashcash algo was used in the bitcoin code. 

EARLY CORE CONTRIBUTORS

Gavin Andresen

Martti Malmi

Amir Taaki

The Bitcoin Foundation's original members included Gavin Andresen, Charlie Shrem, Mark Karpeles, Peter Vessenes, Roger Ver, and Patrick Murck. 

Smart Contracts - It Executes Itself

As a society we have developed laws and legal systems to govern ourselves. In the area of contract laws we have notaries, courts and judges to try and adjudicate contracts in disputes.

Then we have bitcoin and the blockchain and a whole new area of smart contracts is upon us. A smart contract is one that executes itself if all the conditions are met. Bitcoin is smart money. Within it's code Alice can send Bob a bitcoin if date is after XXYYZZ, and when that date arrives the bitcoin will appear in Bob's wallet. This is the simplest example of a smart contract. Contract law has been embedded into code and there is no ambiguity.

Bitcoin code can only handle very simple scripts and so Ethereum was invented to include turing complete languge.

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