This past months has been a roller coaster ride for Bitcoin. The Chinese government on Thursday moved to restrict banks from using Bitcoin in transactions, declaring that it was not a true currency at all, The New York Times reported.
A notice issued by the People’s Bank of China and four other ministries and agencies said the step was needed to ‘protect the status of the renminbi as the statutory currency, prevent risks of money laundering and protect financial stability.’
That scaled back the fast exchange by Chinese trading it faster than Euros, tracked by a site called, Fiatleak. While the Chinese rejected it, Bank of American Merrill Lynch moved to embrace it. Merrill Lynch was a driver on Wall Street during the days of CMO and other instruments prior to the global meltdown of 2008 and its demise.
In a move that appears to be unique among Wall Street firms, Bank of America Merrill Lynch has begun to cover Bitcoin, saying in a research report on Thursday that it could be useful in e-commerce and money transfers.
‘We believe Bitcoin can become a major means of payment for e-commerce and may emerge as a serious competitor to traditional money transfer providers,’ said the report by Bank of America currency strategists led by David Woo. ‘As a medium of exchange, Bitcoin has clear potential for growth, in our view.’
Merrill Lynch has even produced a primer on how Bitcoin is ‘mined’ and an analysis report said that a 'fair value analysis' of the currency suggested a maximum value of $1,300. The report did make note of its shortcomings due to its extreme volatility and making it difficult to achieve international trade and commerce levels.
The Bank of America report follows positive comments by United States government officials. Ben S. Bernanke, the Federal Reserve chairman, told Congress last month that currencies like Bitcoin “may hold long-term promise,” helping send the price higher.
Bitcoin appeared Nov. 18 at the Homeland and Government Agency Senate Committee hearing to listen to statements from the assistant director of the Treasury and a representative from the FBI to discuss its need to be carefully monitored. The FBI took down an online website called, ‘Silk Road’, which used Bitcoin for drug payments and murder for hire.
Bitcoin is not backed by a central government; it is online in open-source, so no one owns it nor regulates it. The production of it is through an algorithm.
Alan Greenspan was directly blunt and told Bloomberg TV: ‘It has to have intrinsic value. You have to really stretch your imagination to infer what the intrinsic value of Bitcoin is. I haven’t been able to do it. Maybe somebody else can’.