Friday, January 10, 2014
The travails of bitcoin might make the cryptocurrency star in its own soap opera one day. The price valuation of bitcoin has fluctuated wildly since China moved to ban its usage in the Chinese economy in December 2013. And now bitcoin is experiencing more turmoil as China's e-commerce giant Alibaba Group moved to outlaw bitcoin from its e-commerce platform Taobao Marketplace.
On Jan. 7, 2103, Taobao, which is China's equivalent of Amazon Inc. and eBay Inc. combined, said it would ban the use of all cryptocurrencies on its platform beginning Jan. 14. Taobao also said it was banning the sale or exchange of all data mining equipment and mining tutorials, which are used to "harvest" cryptocurrencies online.
Bitcoin is the chief virtual currency recognized in the ban. But a host of other cryptocurrencies are also affected, including Litecoin, Beaocoin, Quarkcoin, Infinitecoin, Colossuscoin, CENT, PPCoin and Namecoin. Alibaba reportedly made the move to protect Taobao's consumers, which ostensibly include vendors who sell products and services on the marketplace.
On Dec. 5, when China's central bank, the People's Bank of China, notified the organizations comprising the country's banking infrastructure that they were no longer allowed to deal in bitcoin, the value of the alternative currency plummeted on the open market from over $1,000 per bitcoin unit to somewhere in the $600 range. Bitcoin's valuation has since rebounded, trading above $900 currently.
Tom Waters, Director of Sales at Bank Associates Merchant Services, told The Green Sheet last December that PBC's bitcoin prohibition seemed to be a precursor to the eventual regulation of bitcoin as a viable currency in China. Waters said Taobao's bitcoin restriction seems to be tied into China's previous move, but that the latest development may be inconsequential in the long run.
"I don't think it'll have much effect on the protocol at large," Waters said, noting that the bitcoin marketplace has stabilized somewhat following China's bitcoin prohibition last month. Bitcoin's rebound "could be used to indicate that China's adoption and subsequent regulation bloated the valuation," he said. "But as it creeps up again, I think that these prices reflect increased awareness, and the regulations simply form roadblocks that eventually get run over or worked around."
Waters added that the global marketplace of buyers and sellers of bitcoin establish the value of bitcoin, not governments or individual businesses. "While it would be good for the currency to still be accepted by a large player like Alibaba, these moves don't really hinder the adoption curve on a global scale as more and more smaller companies begin looking at it as an alternative," he said.
However, bitcoin's viability might come into jeopardy if a large payment brand in the United States, like Paypal Inc., Google Inc. or First Data Corp., rejected it, Waters stated.
The bitcoin phenomenon has not been without its whimsical side, though. On Jan. 9, 2014, it was reported that the lawyers of controversial rapper Kanye West hit the founders of so-called alternative currency Coinye with a cease and desist order.
It is unclear if Coinye is a legitimate attempt at a new cryptocurrency, a parody inspired by an episode of the popular animated cartoon South Park titled "Fishsticks" (in which West was lampooned), or both. But it shows the ripple effect bitcoin is having on popular culture, as well as on the global economy.
Another marker of bitcoin's growing cultural and economic impact involves Dogecoin, a cryptocurrency that began as an inside joke shared by "shibes" (lovers of the dog breed Shiba Inu) but has developed into something more substantial. Evidence of its value came on Christmas Day 2013, when hackers reportedly stole $12,000 worth of Dogecoin units from the virtual wallet site Dogewallet.
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