This is a big hit to the credibility of Bitcoin in the near to midterm future.
It sure seems that way, doesn't it? If I had significant amounts of bitcoin, it would freak me out. But, I think we're seeing selection bias here. The fact that I believe that the government will eventually shut the operation down, as they did e-gold, is a big part of why I don't have any bitcoin.
But the thing is, the current bitcoin price, something like $970 as of now (Monday, 11:54 AM PST) would indicate that "the market" (that is, the people who own and are thus in a position to sell bitcoin) doesn't think this is such a huge deal.
This might be one of those places where the difficulty of shorting bitcoin is propping up the price. I don't know if I would /short/ bitcoin right now, but if it were possible, I would probably blow a couple grand on put options if I could do so in a reasonable way.
Bitcoin isn't an "operation" that a government can 'shut down.' It may yet fail by some measure but not directly by government edict.
>I would probably blow a couple grand on put options if I could do so in a reasonable way.
Easy peasy. Bitfinex features margin trading. Good luck. https://www.bitfinex.com/pages/howitworks
My belief is that bitcoin will slowly become less legally convenient, through actions like the story above.
The government can't just shut down bitcoin like they did e-gold, sure, but the government can put in legal barriers to transferring bitcoin. if it becomes defacto illegal to transfer bitcoin? Yes, they haven't "shut down" bitcoin, but for me, they've made it worth zero dollars.
>Easy peasy. Bitfinex features margin trading. Good luck. https://www.bitfinex.com/pages/howitworks
Yeah, that lets me short bitcoin. the difference between a short and a put is that with a put, I'm only risking what I've paid for the put, and the put expires after a certain period of time. Put options become more expensive the further out you want that expiration date (and more expensive as the security in question is perceived to be more volatile, so it's very likely that put options on bitcoins would be very expensive. But they don't have the unlimited liability of a short.)
The fact that I'd be willing to buy put options but I'm not willing to short bitcoin tells you that while I believe it is likely that bitcoin is going to fail, I'm not anywhere near certain.