France Plans To Prohibit Cash Payments Over €1,000

By Jon Matonis
Forbes
Thursday, February 14, 2013

http://www.forbes.com/sites/jonmatonis/2013/02/14/france-plans-to-prohibit-cash-payments-over-e1000/

One of the best things about covering payments news is that you never
run out of stories where various myopic governments attempt to restrict
the flow of cash in a squeeze for revenue.

France becomes the latest as Prime Minister Jean-Marc Ayrault plans to erect
new controls on cash transactions in order to tighten up tax collection
and meet the country’s optimistic budget deficit target of 3% of GDP.
The government needs euros and they need some fast.

In the government plan labeled “Fight against fraud,” France’s
fiscal residents would see the cash transaction limit decrease from
€3,000 to €1,000 per purchase. However, in a nod to the exiled wealthy
and what Wolf Richter calls the “Depardieu exception,” those fiscal residents of a country other than France
would have their cash transaction limits reduced from €15,000 to
€10,000 per purchase. Legislative measures could be finalized by the end
of 2013.

Richter illustrates the ban’s impact with an example of purchasing a used car: “two crisp 500-euro bills and a single coin — voilà,
an illegal transaction.” Used cars could easily cost more than €1,000
and accepting cash protects the seller, but the larger problem may be
finding those 500-euro bills in the first place. While the southern
coast of Spain was once believed to have the highest concentration of 500-euro notes in circulation, the distinctive purple bill has become more like the unicorn of Europe because they are rarely seen. The UK banned the sale of 500-euro notes at exchange offices in 2010.

“It
has long been the dream of collectivists and technocratic elites to
eliminate the semi-unregulated cash economy and black markets in order
to maximise taxation and to fully control markets,” writes
Patrick Henningsen at the Centre for Research on Globalization. “If the
cashless society is ushered in, they will have near complete control
over the lives of individual people.”

The anti-cashists have
escalated this sad drama to a point where it has become like boiling a
frog. The limits are incrementally lowered and lowered until one day,
people wake up and realize that only fully traceable transactions are
permitted in the new cashless society.

In many regions around the
world, a strong and vibrant cash economy is actually underpinning the
faltering national economies that no longer offer sufficient mainstream
opportunities for their citizens. By some estimates,
the global off-the-grid economy represents $10 trillion worth of
economic activity per year. People will produce, consume, and trade in
order to survive and bearer cash plays a critical role in that process.

The futuristic cashless society is marketed as being ultra-modern and at the forefront of technology. However, it is more like the last gasp of a dying behemoth and it is the poor that will suffer the most.

In responding to Simon’s Black’s description of Emperor Diocletian’s 3rd-century tax reforms in All Transactions To Be Conducted In The Presence Of A Tax Collector, a reader commented
that “Tax evasion always increases along with the tax burden.” He
continued, “In fact, it acts as a safety-valve against rebellion.  Since
the rich will always have means to escape heavy taxation, the burden of
bloated government bureaucracy will eventually fall the heaviest on
those of lesser means.”

Is there anywhere left to go if you don’t welcome the fully-traceable cashless society? Spain recently banned cash transactions above 2,500 euros and Italy banned cash transactions above 1,000 euros.

France and other anti-cashist countries could quickly become nations of smurfs, referring to the practice of smurfing, which is a method of structuring cash transactions into smaller deposits of money to avoid cash reporting requirements.

By Jon Matonis
Forbes
Thursday, February 14, 2013

http://www.forbes.com/sites/jonmatonis/2013/02/14/france-plans-to-prohibit-cash-payments-over-e1000/

One of the best things about covering payments news is that you never run out of stories where various myopic governments attempt to restrict the flow of cash in a squeeze for revenue.

France becomes the latest as Prime Minister Jean-Marc Ayrault plans to erect new controls on cash transactions in order to tighten up tax collection and meet the country's optimistic budget deficit target of 3% of GDP. The government needs euros and they need some fast.

In the government plan labeled "Fight against fraud," France's fiscal residents would see the cash transaction limit decrease from €3,000 to €1,000 per purchase. However, in a nod to the exiled wealthy and what Wolf Richter calls the "Depardieu exception," those fiscal residents of a country other than France would have their cash transaction limits reduced from €15,000 to €10,000 per purchase. Legislative measures could be finalized by the end of 2013.

Richter illustrates the ban's impact with an example of purchasing a used car: "two crisp 500-euro bills and a single coin -- voilà, an illegal transaction." Used cars could easily cost more than €1,000 and accepting cash protects the seller, but the larger problem may be finding those 500-euro bills in the first place. While the southern coast of Spain was once believed to have the highest concentration of 500-euro notes in circulation, the distinctive purple bill has become more like the unicorn of Europe because they are rarely seen. The UK banned the sale of 500-euro notes at exchange offices in 2010.

"It has long been the dream of collectivists and technocratic elites to eliminate the semi-unregulated cash economy and black markets in order to maximise taxation and to fully control markets," writes Patrick Henningsen at the Centre for Research on Globalization. "If the cashless society is ushered in, they will have near complete control over the lives of individual people."

The anti-cashists have escalated this sad drama to a point where it has become like boiling a frog. The limits are incrementally lowered and lowered until one day, people wake up and realize that only fully traceable transactions are permitted in the new cashless society.

In many regions around the world, a strong and vibrant cash economy is actually underpinning the faltering national economies that no longer offer sufficient mainstream opportunities for their citizens. By some estimates, the global off-the-grid economy represents $10 trillion worth of economic activity per year. People will produce, consume, and trade in order to survive and bearer cash plays a critical role in that process.

The futuristic cashless society is marketed as being ultra-modern and at the forefront of technology. However, it is more like the last gasp of a dying behemoth and it is the poor that will suffer the most.

In responding to Simon's Black's description of Emperor Diocletian's 3rd-century tax reforms in All Transactions To Be Conducted In The Presence Of A Tax Collector, a reader commented that "Tax evasion always increases along with the tax burden." He continued, "In fact, it acts as a safety-valve against rebellion.  Since the rich will always have means to escape heavy taxation, the burden of bloated government bureaucracy will eventually fall the heaviest on those of lesser means."

Is there anywhere left to go if you don't welcome the fully-traceable cashless society? Spain recently banned cash transactions above 2,500 euros and Italy banned cash transactions above 1,000 euros.

France and other anti-cashist countries could quickly become nations of smurfs, referring to the practice of smurfing, which is a method of structuring cash transactions into smaller deposits of money to avoid cash reporting requirements.

Use Leverage? Bitcoin Trading Volatility Beats Forex: Part 1

Bitcoin is notorious for its price volatility. In the 13 months from January 2012 through the end of January 2013, bitcoin fluctuated from a low of $3.88 to a high of $21.43 and has risen further since then. It’s safe to say that no other forex currency appreciated that much in the same time frame. …read more

The post Use Leverage? Bitcoin Trading Volatility Beats Forex: Part 1 appeared first on Coinsetter Blog.

Bitcoin is notorious for its price volatility. In the 13 months from January 2012 through the end of January 2013, bitcoin fluctuated from a low of $3.88 to a high of $21.43 and has risen further since then. It’s safe to say that no other forex currency appreciated that much in the same time frame. For some, this is a point of concern. But for those who actively trade bitcoin, this unique price volatility means one thing: more opportunity! Most of the information currently available on the interwebs about bitcoin’s volatility is anecdotal and uninformative, so we decided to analyze bitcoin and forex trading data over the past year to understand exactly how much more volatile bitcoin is, how its volatility differs from that of traditional currencies, and its implications on trading.

In our analysis, we compared the prices of all bitcoin trades in the 13 months from January 2012 through the end of January 2013 with the minute-by-minute price of EURUSD over the same time period. We spliced trading data by days, weeks and months and found some pretty cool results. We’re also going to save some of the nitty gritty findings from our analysis for Part 2. But before we get into it, we take a break for this word from our sponsor.

most interesting bitcoin trader

Leverage Offered By Traditional Forex Companies Is Indeed Too Good To Be True

Although forex companies often entice customers with extremely high leverage ratios (some companies offer up to 50:1 leverage), the truth is that they’re compensating for extremely small changes in currency price. In fact, if they didn’t offer leverage, traditional forex would be so devoid of profit opportunity that no retail trader would participate in it. By offering substantial leverage, traditional forex companies do allow you to convert small price changes into worthwhile returns, but there are some strings attached. First, most forex companies don’t actually fill orders and instead bet against their customers. By incentivizing you to lever your trades to the extreme, they increase the likelihood that you will hit a margin call at some point in your trading career and lose the majority of your capital. As they are on the other side of the trade, that means they gain all of your losses. Second, for trades held longer than 24 hours, they can earn substantially more interest on the capital you borrow. End result: traditional forex companies are often incentivized to seduce you into losing situations. The increased volatility associated with bitcoin, however, offers some opportunities to reduce these hazards.

Price Volatility = Free Implied Leverage

According to our trading data from the past 13 months, bitcoin’s price volatility offers the equivalent of up to 18.6x leverage from trading the classic EURUSD currency pair. And even more, you get this leverage without paying interest or risking margin calls–it’s free! What we found most interesting is that there is essentially no leverage benefit to holding a trade for longer than 24 hours, unless you plan on holding onto the position long term (i.e. a year a more). Your implied leverage for holding a trade for one week instead of one day reaches 7.2x versus 6.8x; not much to brag about considering the substantial impact on your trading strategy. Furthermore, if you are going to trade monthly, you might as well just hold onto your positions as long term investments, where you will earn 18.6x versus 7.6x leverage. The chart below sums up our surprising results best.

bitcoin volatility by holding time

Diversifiers Rejoice: Bitcoin and Currency Volatility Are Uncorrelated!

Another interesting result we found from our analysis is that bitcoin volatility is almost completely uncorrelated to the volatility of EURUSD. Over every single one of the holding periods we analyzed (day, week and month in this case), correlation ranged from 0.01 to 0.09. Considering correlation is measured on a scale of -1.0 to 1.0, our results imply essentially zero correlation. This has positive implications on bitcoin’s potential for portfolio diversification and arbitrage opportunities.

bitcoin eurusd correlation

We also took a look at price correlation between bitcoin and EURUSD, and it was uncorrelated as well (the result on daily price change was -0.06).

How Much Leverage Is Too Much Leverage?

Leverage (and especially free leverage) is great, but it has limits to its proper use. Furthermore, while we have looked at volatility as quantified by standard deviation in this piece, your trading strategy needs to be resilient against long-tail price swings. The largest one day bitcoin price swing in the data set we analyzed was 53% above the day’s minimum price. At 2:1 leverage, a trader on the wrong side of this position would have been wiped out completely. The average daily price swing as a percent of the day’s minimum price over the same period was 5.6%, which means 20:1 leverage puts you at risk on an average day, without accounting for even likely deviations from the mean.

bitcoin average price swing

More interesting analysis is on its way! We kept finding more and more useful information as we analyzed this set of trading data. We’ll dive into more results that can help your trading strategy in Part 2 of this series.

The post Use Leverage? Bitcoin Trading Volatility Beats Forex: Part 1 appeared first on Coinsetter Blog.

The Latest on Bitcoin Margin Trading

The recent volatility of the BTC/USD exchange rate has been a potentially profitable day-trading opportunity for savvy investors. But to really take advantage of the past, current and likely coming fluctuations, traders would probably like to leverage …

The recent volatility of the BTC/USD exchange rate has been a potentially profitable day-trading opportunity for savvy investors. But to really take advantage of the past, current and likely coming fluctuations, traders would probably like to leverage their positions and also employ short positions, both something Bitcoin exchanges typically do not offer.

So are there options available to those seeking a profit in this market that would allow them to employ these strategies? Well as it turns out, there are and soon there will be one more.

Coinsetter.com, a highly promising margin trading platform judging by the initial introduction alone, is about to enter beta testing. In the announcement thread, Jaron Lukasiewicz, CEO and co-founder, introduced himself as a former investment banker with previous experience at some of the more prominent American financial institutions. With an air of professionalism, he answered some very tough initial questions posed by the bitcointalk community. Among other things, he revealed that his company will enter beta testing towards the end of February or by the beginning of March, and that he will put up at least $50,000 of his own money towards the platform's initial margin reserves. He said he is also looking for seed capital and intends to fully comply with US financial regulations.

But traders don't have to wait, there already is another option available; BitFinex (based in Hong Kong). Although not without problems, the platform is experiencing growing success that is starting to look quite respectable, and there are even plans to incorporate in Hong-Kong, where they intend to obtain a financial licence from the SFC (Securities and Futures Commission of Hong-Kong).


One other option is ICBIT.se, recently featured by Bitcoin Magazine, a site that seems to have attracted a small group of recurring users.

Of course when talking about margin trading, let's not forget that more than nine months have passed since the owner of Bitcoinca, the infamous Bitcoin margin trading platform, made a thread on bitcointalk.org announcing they were shutting down operations. The culprit was an unauthorized transaction allegedly perpetrated by a hacker that emptied their hot wallet. It's been more than seven months since Amir Taaki, aka genjix, working for the Bitcoin Consultancy group which took over the Bitcoinca fiasco in an attempt to repay their customers with what was left of their deposits, announced that the remaining funds held on Mt.Gox had also been stolen. As was later discovered, the cause was an overlooked security issue within the source code that too was stolen during the hack and even leaked later on.

This tragedy is still unresolved and is currently in the hands of a senior insolvency administrator from New Zealand, Taslim Bhamji, who is trying to carry out the liquidation of Bitcoinca LP, at least whatever is left of it.

Meanwhile, the Bitcoin community has witnessed a few more attempts to launch a new margin trading platform. Kronos.io was supposed to be one but failed miserably before even getting out of beta; the result of a hack and theft that left them mortally wounded. Bitdaytrade.com was another one which likewise crashed and burned due to poor design leaving the site vulnerable to hacks that occurred as soon as it entered beta, forcing the site to be shut down.

These stories should be considered a huge lesson about trusting anyone to handle your bitcoins and just how costly trusting the wrong person or business can be. So although the current market conditions seem highly enticing, before investing a single bitcoin, be sure to weigh the risks of trusting the wrong company and act accordingly.