The digital currency known as bitcoin continues to attract attention as its price soars and dips. On Friday, a bitcoin reached a new record price of $1,242, touching the price of an ounce of gold. It later dropped back to $1,155, a substantial increase on the unprecedented price of $1,000 it hit on Wednesday.
The exact price varies according to the bitcoin exchange reporting the value. For instance, the Mt. Gox exchange in Tokyo said the price on Wednesday was $1,061, while Bitstamp in Slovenia posted $965 and the CoinDesk Bitcoin Price index showed $950.
Nevertheless, the virtual currency is undergoing a boom, given that each one was worth about 4 cents in the beginning months of 2010. In January, a bitcoin was valued at about $13, and about $125 in September.
The Price of Gold
The Winklevoss twins, made famous by their encounter with Mark Zuckerberg over Facebook, have described bitcoin as “gold 2.0” because its value is not impacted by inflation. The twins are currently developing a bitcoin exchange-traded fund and have predicted that the digital coins could hit $10,000 each.
One of the drivers of the rapid rise in the value of bitcoin is demand in China. The top search engine in that country, Baida, has begun accepting bitcoin as payment for certain kinds of services.
Earlier this month, the U.S. Senate Committee on Homeland Security and Government Affairs began receiving statements about whether the currency needed to be better regulated, and if it posed a threat to existing financial markets.
Additionally, bitcoin is being examined because of its popularity as hard-to-track currency for criminal operations. Users can exchange the currency via coded keys and digital wallets without actual names. In March, the U.S. Department of the Treasury said that any organization involved in bitcoin exchanges must be registered with the U.S. government.
Bitcoin’s notoriety surged when the currency was highlighted for its role in buying and selling on the online black market Web site Silk Road, recently shut down the by the FBI. Illegal drugs and criminal activities, including hacking and at least one attempted murder-for-hire, were sold via Silk Road, and, when the FBI arrested its purported founder, they also seized bitcoins worth an estimated $100 million.
Additionally, the International Centre for Missing and Exploited Children has noted that bitcoin’s anonymity makes it the currency of choice for those engaged in sexual crimes involving children. The organization’s president, Ernie Allen, has targeted the currency’s anonymity, although he has praised the idea of a currency for digital commerce.
In response, the Bitcoin Foundation has warned about governmental tracking of citizens’ private activities, as evidenced by the disclosures surrounding the U.S. National Security Agency. Some academic researchers have suggested that because bitcoins are outside the banking system, they could become more accessible to poor communities.
Meanwhile, there is at least one indication that bitcoins may be here to stay. A group of online retailers has begun offering discounts for users paying in bitcoins. Last year, the group had 74 participating merchants when it launched an online deal site, BitcoinBlackFriday. This year, it has more than 200 -- and the organization is hoping to reach 500 this holiday season.