Quote from: Chase on September 08, 2014, 07:20:57 PM

Bitcoin Notes:

1. By now we have all heard that the premature merchant acceptance of Bitcoin and the subsequent immediate selling of it for fiat, makes price stability challenging. There is another obstacle that may be standing in the way of large corporations holding onto it after receiving it as payment.

"Under the generally accepted accounting principles (GAAP), corporations may not be able to count bitcoin holdings as a hedge against currency risk due to the volatile nature of the digital currency. They may instead have to count bitcoin assets as a speculative position, which would increase their risk profile. In other words, large merchants cant be relied on to drive bitcoin demand, nor are they long-term holders of the digital currency."

- http://www.coindesk.com/citi-miners-merchants-keeping-bitcoin-prices-check/

2. This is an article on OTC (over-the-counter) trading of large blocks of Bitcoin - this may come in handy for DNotes one day!

- http://www.coindesk.com/bitcoin-brokers-trade-millions-without-exchange/

Very informative indeed.

I found the following interesting:

>>>
For bitcoin investors hoping for a rise in prices, the presence of a planned $200m hedge fund from Global Advisors, based in Jersey, and the $150m Pantera Capital fund is a sign that prices have to rise eventually. The Pantera fund, in particular, only takes long positions on bitcoin, signalling to some that the digital currency still has room to appreciate.
<<<

Hedge funds typically have excellent research teams since they eat what they kill (as opposed to advisory firms who are immune to whether their research is right or wrong). It would be interesting to watch the growth of hedge funds and their activity.

However, the signal they talk about is wrong. Pantera might actually be forecasting further price decline and will build inventory at lower price levels then current market price and even though they might be long only. They might not end up driving the price.

GAAP treatment of bitcoins on the books is significant. Riskier profile makes credit more expensive for these firms. Any reduction in transaction costs is probably more than offset by loss in value and credit costs. It seems they are using bitcoins as just another channel to get customers.

There is no substitute for price stability and low volatility. Chase rightly called it premature bitcoin acceptance by merchants.