The Breakdown

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Does Mitt Romney have a Bitcoin problem?

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There hasn't been much movement on last week's news that Mitt Romney's tax returns were hacked and that the hackers have demanded a $1-million ransom to not release them to the media — a ransom payable in the peer-to-peer cybercurrency Bitcoin, about which I have been frequently writing for the past few months.

Matthew Elias and James Woods have an excellent piece at American Banker detailing the caper and offering what I think is a good explanation for why the hackers, if they're for real, have done this:

It is...plausible that these actions are motivated by a desire to manipulate the market price of bitcoins, regardless of whether this is a hoax. Someone holding a large position in bitcoins would have a strong incentive to create demand for the large number of coins needed to meet the $1 million ultimatum. The Bitcoin/U.S. dollar exchange rate has historically been very volatile, and an influx of $1 million could drive up the price by as much as 25%...

Bitcoin prices have been on the rise since earlier this year, after a spike at the tail end of last year. I did some experimental BitCoin trading back then and made a pretty tasty return, well above my stretch yield of 25 percent. Then I got involved in some other stories and reporting and didn't trade for months. When the Romney news broke, I checked my position and determined that buy-and-hold works with Bitcoin, too! I traded out of my position for a completely ridiculous gain. If I'd been playing with real money — as opposed to a mere initial $10 — be looking at a 100-percent return on some major (not Bit)coin.

The price of Bitcoin, while still elevated, is lower than it was a few months ago. That could be why this Romney rumor has developed — someone who bought a lot of Bitcoin at the peak may want to drive the price back up. 

It's hard to imagine a scenario in which, if hackers do have Romney's tax returns, that the GOP candidate would actually give in to their demands and get some staffers working on converting $1 million to Bitcoin. So to answer my own question from the title of this post, Romney doesn't have a Bitcoin problem. He — or more accurately, PricewatershouseCooper, his accountants — could have a tax-return problem, if hackers are running around with financial information that Romney would rather not have the public see.

If you have thoughts on this, please take it to the comments. Posts on this topic have generated some lively debate and genuinely helped me to develop a better understanding of Bitcoin and cybercurrencies generally.

Follow Matthew DeBord and the DeBord Report on Twitter. And ask Matt questions at Quora.

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