In The News
Virtual Currency (Bitcoins) Surges to New All-Time Highs – Hits $200
Currency regulators and central bankers look on with suspicion and skepticism
Tuesday April 9 2013 – Contrary to what currency regulators and central bankers were hoping for, the global phenomenon called Bitcoin, which is a virtual currency, isn't going away. In a surprise move today the value of a "Bitcoin" hit new highs, reaching $223 at one point this afternoon.
So what's the big hype about a currency gaining against the greenback, one might ask. Well, it is a big deal when you consider that only 2 years ago, one Bitcoin was worth $9. So that's a 2377.77% jump when taking today's all-time high value. Taking this into a more recent perspective, a $1,000 investment in Bitcoins 2 months ago would have fetched you a hefty $9,000 profit if you had sold yesterday. Now isn't that a dream investment?
So what is a Bitcoin, and why should investors keep an eye on it. Let's take a quick look at some information relevant to your investment decisions.
Bitcoins are a digitally produced crypto-currency that you can use over the internet. And yes, unlike Monopoly currency, Bitcoins can purchase real products and services. Largely a product of the dark recesses of the internet, and previously popular for its underground economy value, Bitcoins have seen the light of day and are now more widely accepted.
As the official website for Bitcoin explains, the virtual currency is created purely through a software model. You install a "wallet" on your computer (or mobile device), and generate Bitcoin addresses, very much like your email address, when you need some currency. And then, just like you share your email address with your friends, you can share your Bitcoin address with anyone to receive Bitcoin "payments" from them. And if you have their Bitcoin address, you can also "pay" them for goods and services using their address.
In the same way an average investor does not need to understand all of the mechanics of how currencies are minted, and how their value is determined on trading exchanges, so too Bitcoin users don't need to bother with the subtle mechanics behind how Bitcoins are generated, tracked and traded. Suffice to say that concepts like "Blockchain", "Transactions" and "Mining" ensure that every Bitcoin is accounted for, and all transactions using Bitcoins are logged.
So what should investors expect as the future of Bitcoins? Well, the banking crises in Cyprus has clearly proved that central bankers might not be the best custodians of your hard earned savings. Anecdotal evidence suggests that Bitcoin usage surged during both the Spanish and Cypriot financial crises. Those lessons, learned the hard way by many investors, have partly been credited for the rise in Bitcoin's acceptance. And the Bitcoin gospel keeps on spreading, with the market value of Bitcoin's reaching over $1B recently.
According to Bloomberg, Bitpay Inc, a bitcoin payment processor recently reported a huge increase (greater than 50%) in the number of organizations using its services, with over 2,000 merchants and companies actively using the virtual currency through them. Respected organizations like WordPress.com have also endorsed it.
As an investment tool too, Bitcoins are gaining acceptance. While there are still regulatory uncertainties surrounding the "investibality" in this relatively new phenomenon, Forbes recently reported on the creation of a Bitcoin Hedge Fund. What may drive investors to migrate from traditional investments into Bitcoins, however, is a few more crises like the Spanish and Cypriot experiences. Disappointment from the much anticipated move for Gold to become an "alternate currency" too could fuel interest in Bitcoins.
Additionally, nervous investors looking at the mass "legal currency manipulation" now taking place, under the guise of Bond buying (Japan) and Quantitative Easing (US), could lose faith in central bankers and monetary policy makers, triggering a flight to Bitcoin-based investments.
Whatever drives the popularity of this new investment vehicle, one thing is for certain: If you are an investor who has no appetite for risk, then Bitcoin investments are not for you. And even if you do have some risk appetite, you may wish to wait for additional clarity around the rules and regulations regarding investing or trading in Bitcoins. But if you are one of those "early adopters" and want to embrace the new kid on the block, then go ahead and choose your wallet!
Good luck in your investing. Let us know if you have any questions, comments or feedback,
MarketConsensus Stock Analysis Team
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(By: Monty R. – MarketConsensus News Contributor)
