So much for the claims that Bitcoins are finished

(Click on figure to make it larger.)

Over the last few weeks it has been very easy to find a number of stories such as this from The Weekly Standard:

As of last week, bitcoin is probably functionally finished as a serious hope of ever achieving mass acceptance as a currency. 

Because last week, someone stole half a billion dollars worth of bitcoins from Mt. Gox, the world’s oldest bitcoin exchange. . . .

From The Economist:

THE father has been found in time for his child’s funeral. That would appear to be the sorry state of affairs in the land of Bitcoin, a crypto-currency, if recent press coverage is to be believed. On March 6th Newsweek reported that it had tracked down Satoshi Nakamoto, Bitcoin’s elusive creator. And on March 11th Mt Gox, the Japanese online exchange that had long dominated the trade in the currency before losing $490m of customers’ Bitcoins at today’s prices, once more filed for bankruptcy protection, this time in America. 

In reality, things are rather different. Evidence is mounting that Dorian Satoshi Nakamoto, whom Newsweek identified as Bitcoin’s father, is not the relevant Satoshi. More importantly, Bitcoin’s best days may still be ahead of it—if not as a fully fledged currency (see article), then as a platform for financial innovation. Much as the internet is a foundation for digital services, the technology behind Bitcoin could support a revolution in the way people own and pay for things. Geeks of all sorts are getting excited—including a growing number of venture capitalists, who know a new platform when they see one. . . .

The bottom line is that the market is betting that Bitcoins are worth about $600 each.  That is a long way from people thinking that Bitcoins are over. 

The End of Bitcoin?: The government doesn't like competition

Governments don't like competition.  Back in the late 1970s the federal government refused to let American Express pay interest on its Traveler's checks because of a fear that people would want to hold them instead of US currency.  That wasn't an unreasonable fear given that inflation got up to an annual rate of 14 percent during the last quarter of 1980.  Currency competition also means that the government can't do what it wants with the currency.  If the government starts printing up a lot of money, people might want to hold an alternative currency that won't be falling in value.  A competing currency also means the government will lose what is called Seigniorage, the difference between what the cost of making the currency and the face value of it.  For cash, it might only be a couple of pennies, but the government can get $20 for a $20 dollar bill.  From the American Banker:

The U.S. government needs more time to assess the Bitcoin "phenomenon" to ensure the virtual currency isn't used for unlawful purposes, Treasury Secretary Jacob J. Lew said. 

Lew, who leads the Obama administration's efforts to fighting illicit finance globally, said he discussed Bitcoin with JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon and shares a "certain incredulity" about it. 

"We have to make sure it does not become an avenue to funding illegal activities or to funding activities that have malign purposes like terrorist activities," Lew said in an interview with CNBC today at the World Economic Forum in Davos, Switzerland. "It is an anonymous form of transaction and it offers places for people to hide." . . .

Try stealing a $20 bill the way that this BitCoin was stolen

Apparently, it is pretty risky to show you Bitcoin QR code on TV.  A viewer scanned the Bitcoin QR code from his TV screen and stole the $20.  That is surely one problem that you don't have with a regular $20 bill.On the other had, you can use a Bitcoin electronically in a way you can't use a $20 bill.  The example discussed on Bloomberg can be seen here.