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Why Cyber Currency Bitcoin is Trading at an All-Time High

*from www.money.cnn.com, Mar. 6, 2013 (To view original article click here.)

Take Away #1: Digital currency, created by an anonymous hacker, called bitcoin, surged Wednesday to nearly $49.

Key Facts and Figures:

  • One bitcoin, worth about $40 U.S. dollars on Tuesday surged on Wednesday to an all-time high of nearly $49.
  • The bitcoin is up from around $13 in January, and up from only $0.05 in 2010 according to Mt. Gox, the bitcoin’s main exchange.

Take Away #2: Some longtime advocates are leery of the recent run-up.

Key Facts and Figures:

  • “Most people don’t think $40 is a valid price right now,” said Jon Holmquist, head of marketing at two Bitcoin-related startups, Coinabul and Bitcoinstore.
  • Stefan Thomas, founder of We Use Coins, says, “When the price starts going up, you get a lot of speculators that want to ride the wave.”
  • The currency is quite volatile given the relatively low number of transactions and overall value of coins in circulation.
  • The bitcoin has gone from under $1 to over $28, then back to $7 in 2011 alone.

Take Away #3: Bitcoin backers believe its recent rise is a sign of its growing community and widespread acceptance.

Key Facts and Figures:

  • Bitcoin was created in 2009 by an anonymous developer using the pseudonym “Satoshi Nakamoto” the Japanese equivalent of a name like “John Smith”.
  • The idea was to create a currency free from government intervention and can be used to conduct transactions without hefty exchange or processing fees.
  • One deal chronicled n the bitcoin data site BlockChain involved a transfer worth nearly $80,000, with a processing fee of merely 1.8 cents.
  • Watchers of the alternative currency attribute some of bitcoin’s recent rise to the recent decision by several popular vendors, like WordPress and Reddit, to accept the coins.
  • Bitcoin is growing in acceptance with merchants.
  • The coins are growing easier to obtain with the emergence of sites like Coinbase and Bitinstant who customers buy bitcoins with U.S. cash or bank transfers.
  • CoinLab, another bitcoin exchange is set to launch later this month.

Take Away #4: The coins are “minted” by a network of computers on powerful hardware systems running specialized software and the underlying system that generates coins is extremely secure.

Key Facts and Figures:

  • The software used to generate coins is designed to release new coins at a steady and finite pace.
  • One new “block” of bitcoins is generated roughly every 10 minutes, adding to the pool of around 10.8 million circulating coins.
  • While the system generating coins is extremely difficult to attack, the digital “wallets” bitcoins owners use to store their wealth have been compromised by a series of high profile thefts in 2011, crashing the currency’s value.

Take Away #5: While there are critics of the digital currency, bitcoin backers see it as a valid alternative to traditional cash.

Key Facts and Figures:

  • Critics contend the anonymous nature of the currency could make it the monetary instrument of choice for money launderers.
  • It is already the standard currency for Silk Road, a notorious online drug bazaar.
  • There are some supporters who believe the U.S. government has too much debt to raise interest rates high enough to defend the dollar if there were ever a run on it, saying, “The U.S. dollar is an obvious Ponzi scheme.”
  • With bitcoin, “you feel like you’re in control of your money.”

*To view original article from www.money.cnn.com click here.

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