The article is interesting, but the writer's main point seems to be lacking much evidence. The normally volatile Bitcoin price actually remained flat for days after the IRS announcement - because it wasn't a surprise.
The article briefly mentions a much more plausible reason for the sizable price drop, which occurred later: China cracking down on bank to exchange deposits. The writer just sort of handwaves it away.
There's no evidence that the IRS ruling pushed the price down, in fact there's plenty of evidence that it did not: the fact that the price did not move.
Meanwhile, there's plenty of evidence that China's action did affect the price. As soon as rumors began to spread, trades on the Chinese exchanges were happening at prices far below those on outside exchanges.
The Chinese exchanges led the market down every step of the way. (Naturally a price fall in China soon began to pull down prices everywhere, due to arbitrage, and an understanding that the probable withdrawal of Chinese money was very bad news for anyone speculating on the short term price).
I tend to agree with you on the immediate cause of the fall, but I do think the friction that will result from the IRS decision really damages the value of Bitcoin as a low transaction cost mean of exchange.
>I do think the friction that will result from the IRS decision really damages the value of Bitcoin as a low transaction cost mean of exchange
It doesn't seem to make much difference. In its current form, Bitcoin already suffers from a lot of friction when used as a means of exchange. For the average consumer, buying it is difficult, storing it is difficult, the value isn't stable, using it for physical retail purchases can be very clunky.
It's a beta. A lot of things would need to work better for it to really succeed. In that context, the rather clumsy reporting requirements of the IRS ruling are yet another minor speedbump, which needs to be either ironed out or worked around.
The article briefly mentions a much more plausible reason for the sizable price drop, which occurred later: China cracking down on bank to exchange deposits. The writer just sort of handwaves it away.
There's no evidence that the IRS ruling pushed the price down, in fact there's plenty of evidence that it did not: the fact that the price did not move.
Meanwhile, there's plenty of evidence that China's action did affect the price. As soon as rumors began to spread, trades on the Chinese exchanges were happening at prices far below those on outside exchanges.
The Chinese exchanges led the market down every step of the way. (Naturally a price fall in China soon began to pull down prices everywhere, due to arbitrage, and an understanding that the probable withdrawal of Chinese money was very bad news for anyone speculating on the short term price).
Chart showing price remaining flat for 2 days following the IRS announcement on 3/25, and then falling sharply on firm news from China (Caixin report 3/27): http://bitcoincharts.com/charts/bitstampUSD#rg60zczsg2014-03...