Bitcoin News First-Quarter Highlights

It’s been quite a first quarter in the Bitcoin universe. From the Mt. Gox collapse to the IRS determination that bitcoin is property rather than money, the cyber currency has grabbed a lot of headlines already in 2014. Here are just a few:
Mt. Gox Exchange Collapses
The big news of 1Q14 was the implosion of Japan-based bitcoin exchange Mt. Gox. Loose supervision by Mt. Gox executives led to what appears to have been a multi-year hack of their digital vaults that not only drained the company of $400 million of the digital currency, but went unnoticed until late February.
Coming on the heels of last fall’s shutdown of Silk Road, the disclosure caused a fall in the worldwide value of the cyber-coins. But as investors realized that the failures were of one company’s management rather than an inherent weakness in the currency, markets recovered some of their value. Echoes of the collapse still reverberate in the market today, though. A buying opportunity? We think so.
Bitcoin Inventor Revealed? Probably Not
On March 6, Newsweek magazine announced with a splashy cover story that they had discovered the identity of the mysterious bitcoin creator, Satoshi Nakamoto. The reporter claimed she had tracked him to Temple City, California where 64-year old former programmer and model train enthusiast Dorian Satoshi Nakamoto lives in a modest suburban residence.
Unemployed and recovering from a potentially life-threatening illness, Nakamoto emphatically denied he is the legendary inventor and has retained counsel to protect him and possibly bring action against Newsweek for a host of grievances caused by their report.
Forbes magazine reports that a handful of bitcoin heavyweights have come together to crowd-fund resources to help Nakamoto with his expenses.
Bitcoin Exchange CEO Found Dead
The same day Newsweek broke its story about Nakamoto, police in Singapore announced that they had found the body of bitcoin exchange First Meta’s top executive Autumn Radtke. They called her death “unnatural,” causing speculation that is was a suicide, possibly motivated by the collapse of Mt. Gox and the subsequent drop in bitcoin value, although later reports indicate she also had other personal and business problems. Foul play is not suspected.
Mt. Gox CEO Ordered to U.S. Bankruptcy Court
The judge presiding over the bankruptcy proceedings of bitcoin exchange Mt. Gox has ordered CEO and majority owner Mark Karpeles to appear in her courtroom to testify. Mt. Gox customers have filed suit in an attempt to recover at least part of the estimated $400 million that they lost when the company shut down and filed for bankruptcy late this February. As the person in control of the company’s financial records, Karpeles may be the only hope of tracking down what happened to the assets and how much may be recoverable. Testimony is set for mid-April in U.S. District Court in Dallas, Texas.
Overstock.com Rakes in Sales with Bitcoin
Popular online retailer Overstock.com joined the growing number of mainstream businesses that accept bitcoin for payment in January. On their first day of taking bitcoin, Overstock received 780 orders worth $124,000.
Today you can buy everything from NBA tickets to submarine sandwiches with bitcoins. There are even ATMs coming online that handle bitcoin. With 12.4 million bitcoins in circulation representing $6.7 trillion US, what many dismissed as a fad is proving to be a growing force in commerce worldwide.
IRS Rules Bitcoin is Property, Not Money
In a long-awaited ruling, the U.S. Internal Revenue Service has declared that bitcoins are tangible property rather than currency. According to an IRS news release, “General tax principles that apply to property transactions apply to transactions using virtual currency.”
The ruling means that bitcoin gains and losses are subject to the same rules for deductions and credits as other income—capital gains and losses, for instance. That could be good news for bitcoin owners who face taxes on substantial gains or losses. But taxpayers who thought their bitcoin holdings would be free from taxation may be disappointed to learn that Uncle Sam is watching. Be sure that your tax advisor is up-to-date on the ruling to avoid potential problems.
Amagi’s Macaskill Remains Bullish on Bitcoin
Because bitcoin is a freely-traded commodity with no backing other than the faith of its investors, it is subject to extreme day-to-day volatility. This is largely based on sensational news accounts and rumors that send speculators in the currency dashing to their keyboards to buy or sell bitcoins impulsively.
Amagi Metals owner Stephen Macaskill remains convinced that bitcoin is a positive long-term investment that, along with gold and other precious metals, will give its owners a strong shelter when the storms of inflation and fiat currency manipulation blow, as they inevitably must. “We feel that the concept of bitcoin and the technology behind it make it a viable currency that offers more long-term security than government-backed currencies like the dollar or the Euro,” he says.
Amagi Metals has been accepting bitcoins for gold and silver purchases for nearly two years, and is one of the country’s largest bitcoin retailers with over $1 million in transactions every month.

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