Chinese Communists doing a Dead Cat Bounce

Bitcoin crashes 20% on China clampdown fears

Virtual currency bitcoin lost around $200 in value on Thursday after the People's Bank of China outlawed the country's banks from using it, leading some to cash in on their investments. At around 8 a.m. London time, the price of a bitcoin sharply dipped by 20 percent back below the $1,000 level it reached around one week ago. At midday London time, the currency was trading at $980 on major exchange Mt Gox and $932 on CoinDesk's index, which measures a basket of prices around the world.

The Chinese will partly relent. This is dead cat behavior in bureaucrats. They first pounce, then think, then adjust. China just made the Chinese fiat more valuable, with respect to Bitcoin. Not their intention. So they now rethink, then partially re-regulate Bitcoin into existence. They discover the Bitcoin has some positive utility in their worldview. This is good news for Bitcoin, it establishes the largest shock they can expect, it establishes a limit on quantization noise, so the market will stabilize more, over time, having a known risk boundary.

Our Bitcoin ATMs will charge us for bad government behavior

 When Bitcoin ATMs have to risk sudden shocks by government, then they have to keep more cash on hand.  That extra expense is the dead cat bounce, ammoriized over the interval between dead cat behavior.  That actual cost is the increasing number of trips between the Bitcoin ATM machines, and the the owner's collection of paper. But, governments are doing their shocks,and  the finite set of available shocks aimed at Bitcoin is diminishing.  The actual ATM fee for these shocks is the power spectrum of our best long term estimate of the typical dead cat government action. The article says a Chinese dead cat costs 20% in change.  One fifth squared is one twenty-fifth, and that is a 4% transaction fee for Bitcoin machines, but the fee, a liquidity cost, reduces over time. Today most people will not tolerate a 3% fee for ATM cash, but much of the indirect shock fees to Bitcoin are made up by efficiency gains over paper.