The Bitcoin, the relatively new digital currency, has been rising very rapidly as of late. Bitcoins are in the news today because the value of one Bitcoin has increased more than 9000 percent in 2013 and Friday morning was trading at or above the price of an ounce of gold.
In March of this year, TheBlaze covered the recent rise of the Bitcoin, who is using it, and what risks it might hold.
There was also a three minute video posted on TheBlaze called "Bitcoin Explained." As you will learn in the video (or may already know), Bitcoins are unlike the U.S. dollar in that, there is a finite amount of them. That fact seems to have helped increase the value of the electronic currency.
On January 1, 2013, the price of a Bitcoin was $13.51. When the video referenced above was released, Bitcoins were trading for around $70 each. Friday morning saw Bitcoin transactions breaking through the pre-Thanksgiving $1044 mark and hitting $1242 before sliding back to around $1190.
It also should be noted that Bitcoin pricing has had some spikes as well as some serious dips in value. Jumping from $13 to $230 on April 9, and then back down under $70 just a week later. The chart below shows Bitcoin trading between $100 and $200 for most of the summer. However, after dipping to $99.81 on October 2, Bitcoin has been on a bit of a run.
On October 23, it broke through the $200 level, and then shot past $500 all the way to $1044 on the Wednesday before Thanksgiving. Friday's Bitcoin trades pushed the digital currency to $1242.
The price volatility and drops in Bitcoin valuations have been difficult to predict. Some tie the drops to profit-taking by early investors, while the upward movements seem to be driven by the acceptance of the digital currency by foreign governments. The fact that China, Canada, the Netherlands and Germany have backed off or completely removed regulations on Bitcoin may have signaled that it is becoming a trusted commodity.
But what about places to spend those Bitcoins? The CoinDesk.com lists on-line gambling as one of the top places where Bitcoins are spent. However, the variety of online outlets selling products and accepting the new money seems to be growing quite quickly. CNN came up with a list of "Eight Things You Can Buy With Bitcoins Right Now. The CNN list includes everything from a sandwich as Subway to an airline ticket through CheapAir.com. The Bitcoin Store sells mostly electronics, but you can also get some sporting goods on the site. BitcoinShop was more like a department store, offering everything from appliances to watches. There's even an online pet supply store that will accept Bitcoin. And most of the Bitcoin retailers were also participating in the season's biggest shopping event -- Black Friday.
Aside from the volatility issue, Bitcoin has some other issues. Unlike physical gold, a Bitcoin only exists in the digital world. There are no Bitcoins sitting around in vaults or hidden in the back of sock drawers. They reside on computer hard drives.
Just today a British man announced that he threw away an old hard drive that contained digital data for 7500 Bitcoins worth between $7.5 and $9 million dollars. Unless he finds the actual hard drive in a landfill, that "money" is gone forever. The only good news -- he probably paid pennies for each of the Bitcoins when he bought them back in 2009.
Will Bitcoin sustain the growth seen in the past few weeks? It's difficult to say, but it is also hard to predict if there will be a Bitcoin bubble that bursts and sends the virtual coin's value plummeting. Considering that the number of the coins are finite, and legitimate outlets are now accepting them as payment, it would appear that Bitcoin is here to stay. Only time will tell.
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