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Re: What is the main reason for the recent price raises?
by
numismatics
on 28/03/2013, 20:13:13 UTC
I don't understand what the FinCen announcement has to do with it. So it means that someone wants to use it to make a US exchange, and therefore bought a ton of Bitcoins, which drove the prices higher? How does FinCen translate into higher prices?

The announcement signals that the US Treasury Dept., and thereby the US Government, recognizes the use of BTC for barter, and clearly proclaims it legal. While there's some exceptions for other activities—use from which an income is derived, i.e., mining or arbitrage—the announcement legitimates US BTC holders and increases certainty in BTC transacting. Whether or not it wold be easy for the US government to interfere with US BTC use is besides the point; if the FinCen had announced BTC use contravened criminal statutes with stiff penalties, do you think the USD-BTC currency pair would have responded the same way? Generally, receiving recognition and legitimacy from a sovereign increases that asset's value; when that sovereign is home to a significant proportion to the demand of that asset, the announcement of recognition and legitimacy will affect the price for which that asset is traded, provided sufficiently liquid markets.