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- wong chee tat :)
Sunday, April 7, 2013
As Bitcoin virtual currency soars, bubble fears do too
As Bitcoin virtual currency soars, bubble fears do too
In May 2010, a programmer called Laszlo asked an online forum if anyone would buy him a couple of pies in exchange for 10,000 Bitcoins, an experimental online currency launched in 2009.
PARIS: Some call it the most famous pizza purchase in history: In May 2010, a programmer called Laszlo asked an online forum if anyone would buy him a couple of pies in exchange for 10,000 Bitcoins, an experimental online currency launched in 2009.
"No weird fish topping or anything like that," he wrote.
With each Bitcoin fetching less than a cent at the time, the order was worth about $41. Today, it would be valued at about US$1.4 million.
As of Friday, a single Bitcoin traded at around US$135, with the currency nearing US$147 earlier in the week -- up from about US$20 at the start of February. It's a stratospheric jump some claim has been fuelled by Cypriots and Russians seeking to invest their euros elsewhere during Cyprus's banking crisis, stoking fears that a new online bubble might soon burst.
"It's completely irrational," said Yannick Naud, a portfolio manager at the London-based Glendevon King Asset Management firm, who has seen an increase in client queries about Bitcoins. "As an investor you can't put any underlying value on the Bitcoin itself."
Bitcoins were launched in 2009 in the wake of the global financial crisis by an anonymous programmer who wanted to create a currency independent of any central bank or financial institution. A form of "e-money", it is made of strings of dazzlingly complex code created by raw computing power -- a process called "mining" that can in theory be carried out by anyone with a computer.
The software is written in such a way that it becomes increasingly difficult to generate new Bitcoins, with the number in circulation designed to eventually top out at 21 million.
Once mined, Bitcoins are stored on a user's hard drive in a virtual wallet, and can be sent directly to another person. Such peer-to-peer sharing bypasses the banks so is largely anonymous. But this brings its own risks -- in June 2011, hackers targeted virtual wallets and wiped some people's accounts clean.
At first a coder's curio, Bitcoins quickly found a home in the "deep web", the shadier part of the Internet that is largely anonymous and requires some good technical understanding to access. It was used to fuel illicit drug buys and pay for other illegal services on specialist sites.
But computer aficionados and tech-savvy libertarians embraced the currency too, and in recent months a flurry of legit businesses have started accepting Bitcoins.
A cottage industry of stores buying and reselling goods online for Bitcoins has emerged, and some high-profile transactions have helped push the currency into mainstream consciousness. One Canadian man reportedly hoped to sell his house for Bitcoins, and a US man claimed to have traded his 2007 Porsche for 300 Bitcoins.
Robert Walker, a digital designer from London, said he bought about 200 Bitcoins over a six-month period starting at the end of 2011. He spends much of his time online and was excited by the idea of the Internet minting its own currency, and an investment not beholden to any central authority.
His purchase set him back about US$900, but today would net some US$27,000. But despite this week's new price highs, he's going to keep his virtual stash -- for now at least.
"It's not a life changing amount of money, but it could be if I sat on it for five years," Walker said.
But for Naud, the asset manager, Bitcoin is reaching unsustainable levels. On paper at least, the value of Bitcoins in circulation now tops US$1 billion, and a continued increase in price will require a lot of new investors.
"The bubble will burst when there will be less people willing to enter (the Bitcoin market) than people willing to leave it," he said. "It's hard to pinpoint, but it probably won't last another month at this price."
Experts said Bitcoins are especially vulnerable to rapid deflation. Governments trying to regulate them, for example, could spook investors and cause them to lose confidence. Already in the US, regulators have taken note of the currency and moved to make firms report transactions worth $10,000 or more, according to the Wall Street Journal.
"If it gets very popular, I can see the government clamping down," said Alistair Cotton, a senior analyst with Currencies Direct. "I think it would lead to a massive drop off in the number of users."
The Cyprus banking crisis - which saw the tiny nation agree a bailout deal with the International Monetary Fund, European Commission and European Central Bank that will shrink the banking sector and lead to losses on deposits of more than 100,000 euros - also coincided with a run-up in Bitcoin valuation.
Cotton sees similarities between Bitcoin and Napster, an early online file-sharing service that ran into legal difficulties and was eventually closed, though it was soon replaced by numerous other file-sharing services. Even if Bitcoin doesn't last, other virtual currencies will surely rise in its place, he said.
"If you look back in history in terms of financial bubbles, they always end," he said. "It's going to be a very rough ride for guys that invest in Bitcoin for speculative purposes."
- AFP/jc
- wong chee tat :)
In May 2010, a programmer called Laszlo asked an online forum if anyone would buy him a couple of pies in exchange for 10,000 Bitcoins, an experimental online currency launched in 2009.
PARIS: Some call it the most famous pizza purchase in history: In May 2010, a programmer called Laszlo asked an online forum if anyone would buy him a couple of pies in exchange for 10,000 Bitcoins, an experimental online currency launched in 2009.
"No weird fish topping or anything like that," he wrote.
With each Bitcoin fetching less than a cent at the time, the order was worth about $41. Today, it would be valued at about US$1.4 million.
As of Friday, a single Bitcoin traded at around US$135, with the currency nearing US$147 earlier in the week -- up from about US$20 at the start of February. It's a stratospheric jump some claim has been fuelled by Cypriots and Russians seeking to invest their euros elsewhere during Cyprus's banking crisis, stoking fears that a new online bubble might soon burst.
"It's completely irrational," said Yannick Naud, a portfolio manager at the London-based Glendevon King Asset Management firm, who has seen an increase in client queries about Bitcoins. "As an investor you can't put any underlying value on the Bitcoin itself."
Bitcoins were launched in 2009 in the wake of the global financial crisis by an anonymous programmer who wanted to create a currency independent of any central bank or financial institution. A form of "e-money", it is made of strings of dazzlingly complex code created by raw computing power -- a process called "mining" that can in theory be carried out by anyone with a computer.
The software is written in such a way that it becomes increasingly difficult to generate new Bitcoins, with the number in circulation designed to eventually top out at 21 million.
Once mined, Bitcoins are stored on a user's hard drive in a virtual wallet, and can be sent directly to another person. Such peer-to-peer sharing bypasses the banks so is largely anonymous. But this brings its own risks -- in June 2011, hackers targeted virtual wallets and wiped some people's accounts clean.
At first a coder's curio, Bitcoins quickly found a home in the "deep web", the shadier part of the Internet that is largely anonymous and requires some good technical understanding to access. It was used to fuel illicit drug buys and pay for other illegal services on specialist sites.
But computer aficionados and tech-savvy libertarians embraced the currency too, and in recent months a flurry of legit businesses have started accepting Bitcoins.
A cottage industry of stores buying and reselling goods online for Bitcoins has emerged, and some high-profile transactions have helped push the currency into mainstream consciousness. One Canadian man reportedly hoped to sell his house for Bitcoins, and a US man claimed to have traded his 2007 Porsche for 300 Bitcoins.
Robert Walker, a digital designer from London, said he bought about 200 Bitcoins over a six-month period starting at the end of 2011. He spends much of his time online and was excited by the idea of the Internet minting its own currency, and an investment not beholden to any central authority.
His purchase set him back about US$900, but today would net some US$27,000. But despite this week's new price highs, he's going to keep his virtual stash -- for now at least.
"It's not a life changing amount of money, but it could be if I sat on it for five years," Walker said.
But for Naud, the asset manager, Bitcoin is reaching unsustainable levels. On paper at least, the value of Bitcoins in circulation now tops US$1 billion, and a continued increase in price will require a lot of new investors.
"The bubble will burst when there will be less people willing to enter (the Bitcoin market) than people willing to leave it," he said. "It's hard to pinpoint, but it probably won't last another month at this price."
Experts said Bitcoins are especially vulnerable to rapid deflation. Governments trying to regulate them, for example, could spook investors and cause them to lose confidence. Already in the US, regulators have taken note of the currency and moved to make firms report transactions worth $10,000 or more, according to the Wall Street Journal.
"If it gets very popular, I can see the government clamping down," said Alistair Cotton, a senior analyst with Currencies Direct. "I think it would lead to a massive drop off in the number of users."
The Cyprus banking crisis - which saw the tiny nation agree a bailout deal with the International Monetary Fund, European Commission and European Central Bank that will shrink the banking sector and lead to losses on deposits of more than 100,000 euros - also coincided with a run-up in Bitcoin valuation.
Cotton sees similarities between Bitcoin and Napster, an early online file-sharing service that ran into legal difficulties and was eventually closed, though it was soon replaced by numerous other file-sharing services. Even if Bitcoin doesn't last, other virtual currencies will surely rise in its place, he said.
"If you look back in history in terms of financial bubbles, they always end," he said. "It's going to be a very rough ride for guys that invest in Bitcoin for speculative purposes."
- AFP/jc
- wong chee tat :)
Italy to pay 40b euros owed to business to boost growth
Italy to pay 40b euros owed to business to boost growth
The Italian government on Saturday gave its go-ahead for a bill to repay 40-billion euros in debts owed to the private sector over the next 12 months in a bid to stimulate growth.
ROME: The Italian government on Saturday gave its go-ahead for a bill to pay back 40 billion euros in debts owed to the private sector in a bid to boost businesses and stimulate growth as the country endures its longest post-war recession.
"The cabinet meeting today approved an urgent decree to pay back the debts of the public sector to the private sector," Prime Minister Mario Monti told a press conference after the talks.
The bill had been eagerly awaited by the business community in the Eurozone's third largest economy, where many companies are suffering from the slump in demand and a lack of credit from banks.
The decree recognises "the extreme importance, necessity and urgency in paying public sector debts to businesses as a precondition for an economic and labour market recovery," said Antonio Patuelli, head of the main banking lobby ABI.
The bill's timetable is for 40-billion euros (US$52 billion) in payments over one year instead of over two years, the period proposed previously -- another expected boon for businesses.
On average 215,000 companies are affected and the average debt is 422,000 euros. Some two-thirds of the debts are owed to medical companies supplying the public health sector. The payments also include the building of roads, repairs of schools etc.
Finance Minister Vittorio Grilli said that the payments could begin as early as Monday and that the oldest debts would be repaid first.
The parliament still must give final approval.
Monti said total debts were 80 billion euros at the end of 2011 and that banks estimated they had since risen to more than 100 billion euros.
"This means costs for businesses and for the whole country. It is an unacceptable situation that has taken on ever greater dimensions," Monti said.
The interim prime minister, who is in charge awaiting the formation of a new government following elections in February, said the payments would not breach the deficit threshold of 3.0 percent of GDP mandated by the European Union.
The repayment increases Italy's forecast deficit to 2.9 percent from 2.4 percent earlier, Grilli said, adding that this had been given the go-ahead by the EU since it did not constitute new spending.
The finance ministry will carry out special monitoring in September to ensure that the 3.0-percent threshold is not breached, Grilli said.
"This was very needed," Paolo Buzzetti, head of the National Association of Construction Companies, told news channel Sky TG 24.
"We can definitely go to Europe and ask to be able to go over that three-percent threshold. Other European countries have done it," he said.
But Carlo Sangalli, head of the business lobby Rete Imprese Italia, said the bill showed the government had "not understood" that the business community "risks collapse".
Sangalli said the payments should be made immediately and the procedure for obtaining payments should be made much simpler.
Monti stressed that the bill did not mean that his government was easing its budget discipline or had plans to stay in charge, adding that Saturday's cabinet meeting "could be the last one".
A general election yielded no clear winner, and the main political forces -- Pier Luigi Bersani's centre-left, Silvio Berlusconi's centre-right and a new protest party -- have failed to find an agreement to form a new government.
The economy is forecast to shrink by 1.3 percent this year, although government officials have said the result could be even worse with a contraction in gross domestic product of up to 1.7 percent.
The economy shrank by 2.4 percent in 2012.
Unemployment is close to record highs, and many Italians have been put under unprecedented pressure by successive rounds of austerity measures and tax hikes, sparking an increase in suicides by small business owners and pensioners.
- AFP/fl
- wong chee tat :)
The Italian government on Saturday gave its go-ahead for a bill to repay 40-billion euros in debts owed to the private sector over the next 12 months in a bid to stimulate growth.
ROME: The Italian government on Saturday gave its go-ahead for a bill to pay back 40 billion euros in debts owed to the private sector in a bid to boost businesses and stimulate growth as the country endures its longest post-war recession.
"The cabinet meeting today approved an urgent decree to pay back the debts of the public sector to the private sector," Prime Minister Mario Monti told a press conference after the talks.
The bill had been eagerly awaited by the business community in the Eurozone's third largest economy, where many companies are suffering from the slump in demand and a lack of credit from banks.
The decree recognises "the extreme importance, necessity and urgency in paying public sector debts to businesses as a precondition for an economic and labour market recovery," said Antonio Patuelli, head of the main banking lobby ABI.
The bill's timetable is for 40-billion euros (US$52 billion) in payments over one year instead of over two years, the period proposed previously -- another expected boon for businesses.
On average 215,000 companies are affected and the average debt is 422,000 euros. Some two-thirds of the debts are owed to medical companies supplying the public health sector. The payments also include the building of roads, repairs of schools etc.
Finance Minister Vittorio Grilli said that the payments could begin as early as Monday and that the oldest debts would be repaid first.
The parliament still must give final approval.
Monti said total debts were 80 billion euros at the end of 2011 and that banks estimated they had since risen to more than 100 billion euros.
"This means costs for businesses and for the whole country. It is an unacceptable situation that has taken on ever greater dimensions," Monti said.
The interim prime minister, who is in charge awaiting the formation of a new government following elections in February, said the payments would not breach the deficit threshold of 3.0 percent of GDP mandated by the European Union.
The repayment increases Italy's forecast deficit to 2.9 percent from 2.4 percent earlier, Grilli said, adding that this had been given the go-ahead by the EU since it did not constitute new spending.
The finance ministry will carry out special monitoring in September to ensure that the 3.0-percent threshold is not breached, Grilli said.
"This was very needed," Paolo Buzzetti, head of the National Association of Construction Companies, told news channel Sky TG 24.
"We can definitely go to Europe and ask to be able to go over that three-percent threshold. Other European countries have done it," he said.
But Carlo Sangalli, head of the business lobby Rete Imprese Italia, said the bill showed the government had "not understood" that the business community "risks collapse".
Sangalli said the payments should be made immediately and the procedure for obtaining payments should be made much simpler.
Monti stressed that the bill did not mean that his government was easing its budget discipline or had plans to stay in charge, adding that Saturday's cabinet meeting "could be the last one".
A general election yielded no clear winner, and the main political forces -- Pier Luigi Bersani's centre-left, Silvio Berlusconi's centre-right and a new protest party -- have failed to find an agreement to form a new government.
The economy is forecast to shrink by 1.3 percent this year, although government officials have said the result could be even worse with a contraction in gross domestic product of up to 1.7 percent.
The economy shrank by 2.4 percent in 2012.
Unemployment is close to record highs, and many Italians have been put under unprecedented pressure by successive rounds of austerity measures and tax hikes, sparking an increase in suicides by small business owners and pensioners.
- AFP/fl
- wong chee tat :)
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