The value of any commodity is dictated by supply and demand. E.g. what cash flows does a kg of gold have? Only one, at the point at which you sell it. At which time you would hope that that its value had increased by at least the opportunity cost of capital.

If we assume that upon closure of Silk Road all its participants would no longer buy bitcoins to fund their trading, then demand should drop by the approximate percentage that Silk Road had of current bitcoin transactions. This is about 4% (http://www.businessweek.com/articles...ins-reputation), which is why the post-bust target price of bitcoin was assumed to be only slightly lower than the pre-bust price and the 'undershoot' was just that - typical market 'madness of crowds' pessimism followed by a rapid correction upwards.

Entirely right... If bitcoins WERE a commodity.

Is bitcoin a commodity? Let's grab a few points from the wiki page on commodities (any economics text will give similar points):

A commodity:

- Is a marketable item produced to satisfy wants or needs.
- Has full or partial fungibility.
- Has a price that is determined as a function of its market as a whole.

We can also look at how commodities are defined under U.S. law (see http://blog.bitcointitan.com/post/17...-commodities):

- A "commodity" is defined under U.S. law as "[a] useful thing; an article of commerce; a moveable and tangible thing produced or used as the subject of barter or sale."
- A thing is tangible if it is "capable of being possessed or realized; readily apprehensible by the mind; real; substantial; evident."

Bitcoin clearly satisfies the fungibility and pricing requirement. It is capable of being possessed (U.S. law defines the concept of "constructive possession" which is "control or dominion over a property without actual possession," compared to actual possession, which is "physical occupancy or control over property").

So we are left with having to show how how bitcoin is "useful" and can "satisfy wants or needs". Bitcoin is useful as a unit of exchange and a store of value; it can transfer value globally without requiring a trusted third party at low cost and clearly has a demand for this function.

Bitcoin is a commodity.

Under a wishful thinking application of the law - yes.

There's already been a U.S. federal ruling:

http://www.nbcnews.com/technology/bi...ney-6C10874611

"The ruling is interesting," he wrote in an email to NBC News, "because it highlights the fact that Bitcoin is becoming recognized as commodity money in the same way that gold and silver are recognized as money."

And the federal ruling says it's money (surprise, surprise).

So we seem to agree then that it's more money than commodity - whereas gold and silver have an actual intended use other than merely replacing fiat currencies (not to mention you'll be hard pressed to pay for anything in gold or silver bullion), you cannot really argue the same for bitcoins (regardless of what Mr. Matonis would like us to believe).

Non-fiat money is a commodity. http://en.wikipedia.org/wiki/Commodity_money

Bitcoin does have an important industrial use - it can be exchanged rapidly with total security and low cost (try doing that with gold) and it has low storage costs for even very high value amounts. Now, while this may sound like a circular argument (bitcoin is good commodity money because it's good at being money), it's actually valid because these are attributes that commodity money hasn't had up to now.

Internet communications have revolutionized many businesses over the last twenty years and this shows no signs of slowing down. Bitcoin (or the spin-off technologies) could do a similar thing in finance. The power of bitcoin's blockchain to do things like binding contracts, secure messaging, financial instruments is something that has barely being touched yet. All this has the potential to be really valuable stuff, hence why bitcoin is a valuable commodity and people are prepared to pay $150 for each one. (This value is above that expected from bitcoin's current money velocity and indicates the future value people expect from this technology).

I am interested in grassroot currencies and trading practices, especially since the banking collapse and Ponzi schemes. I don't understand Bitcoins but have been told that Bitcoins are another type of Ponzi scheme, kind of like Pyramid selling. In any case if it produces income it will be taxed.

The German finance ministry has recently made the decision that bitcoins are a form of "private money" and are subject to capital gains tax just as trading in any other financial instrument is. (25% if held for less than a year, zero afterwards).

http://www.faz.net/aktuell/finanzen/...-12535059.html

The trustworthy soul Bernanke says that bitcoin could be legitimate.

It's spikes to $900

Anyone make a wade of cash?

It's more the totality of the Senate hearings than just Bernanke's letter which helped the spike (and it was already heading there anyway).

The $900 peak was immediately followed with a sell-off to $585. Any reasonable MACD or EMA-crossover bot should have been able to scalp that with a short position. There are plenty of these opportunities in Bitcoin day-trading.

Current price is about $700 and slightly soft. The current intense publicity will probably draw more fiat into the exchanges and $1000 is definitely on the cards. (China has already gone over $1000 in Yuan equivalent).

The value of money is also dictated by supply and demand.

There was an interesting point in the hearings when Senator Carper asked Jennifer Shasky (FinCEN director) whether Bitcoin was a commodity or a currency; she demurred and said it wasn't up to her. Of course, in relation to the US government, the question only has relevance as to which agency gets to regulate it...

The price of one bitcoin has just passed through the psychologically-important $1000 barrier. Next thing to look forward to is parity with one ounce of gold (about $1250).

Bitcoin is being shredded by the chinese government and by the french banque de france. If you have any, sell!

I hate to say I told you so ( see my earlier post) but.......

http://www.businessinsider.com/bitco...to-576-2013-12

Seriously Guys, Look at the people on this thread who told you to buy and figure out who were the ones who sold the Bitcoin at its peak just before it crashed.

It was hardly rocket science to work out that the bubble is going to pop

Yes but who had the gall to say it?

Everybody?