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 A currency or a commodity?
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James R. Davis
Male Administrator
17396 Posts

Houston, TX


GoldWing 1500

Posted - 07/22/2014 :  7:55 AM Follow poster on Twitter  Join poster on Facebook as Friend                        Like
It's astonishing to me that its been more than three months since anybody has bothered to comment about Bitcoins here given the almost daily news reports about the industry.

I'll here post a short update highlighting what I think are the most significant developments to 'test the waters' to see if there actually is interest that has been hidden for lack of apparent community interest.

The IRS has put out a position paper that declared that Bitcoins are NOT a currency but are, instead, a commodity. That means that investors can treat long-term gains or losses involving Bitcoins as CAPITAL GAINS (or losses), but NOT INCOME.

California just past a law recognizing Bitcoins as 'LEGAL TENDER' (money), at least in California.

But Bitcoins have no future unless they become more than convenient stores of value and the exchange of that value. Merchants must accept Bitcoins in payment for goods and services before the populace begins to treat Bitcoins like currency. And that is happening more and more every day.

  • OVERSTOCKED.COM announced that since it began accepting Bitcoins their sales have increased by over $1.3 million in just the few months this year that they have allowed it - and I'm talking about sales in which Bitcoins were used to pay for those purchases.
  • DISH TV accepts Bitcoins as payments of their subscriptions from their millions of subscribers.
  • DELL accepts Bitcoins for purchases of their products and is now the largest merchant ($56 BILLION) to do so.
  • There are now more than 70,000 merchants that accept Bitcoins in the United States.
  • Bitcoin ATM's are being installed in countries all over the world.

There are now just over 13,000,000 Bitcoins in the world. Those Bitcoins are now valued by the world to be worth (have a market capitalization) of more than $8 BILLION. Bitcoins are traded (exchanged for currencies) on hundreds of exchanges all over the world in dozens of different currencies. By far the largest set of Bitcoin trades are for US Dollars.

To give you a feel for that, in just the three largest exchanges that deal in Bitcoins and US Dollars, about ONE QUARTER BILLION DOLLARS of trades are executed each month.

As a vehicle for transferring value Bitcoins is unprecedented. There are NO MIDDLEMEN or institutions (or governments) involved and as a result the cost to transfer value from one place to another is almost non-existent. In the last 24 hours more than 404,000 Bitcoins were sent from one wallet to another (NOT COUNTING TRADING AT THE EXCHANGES). Those wallets could be located in the same room as each other, or the same computer, or in different countries - ANYWHERE.

Oh, and those exchanges - THERE ARE NO BROKERS! Individuals handle their own transactions from their own computes. And, of course, there are no brokerage fees as a result.

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