In its short life thus far, Bitcoin has managed to both rise and fall in spectacular fashion – all the while attracting more attention from the mainstream. Learn why now could be the perfect time to move in on the digital currency craze…
Hard to believe that less than 18 months ago, you could still buy a single bitcoin for $10.
For those of us who aren’t familiar, Bitcoin is a digital currency system that’s taken the world by storm.
Introduced in 2009, this decentralized financial system isn’t tied to the value of any one country’s currency (meaning central banks have no control over it) and it allows users to conduct trade anonymously.
Another feature is that Bitcoin was designed so that there is a finite amount of it (21 million units worth) available for the rest of its existence.
Furthermore, a single bitcoin can be broken up and traded in micro denominations — think a tenth of a penny, but without the need to lug a massive coin purse around.
To date, about 60% of bitcoins have been released. Through a highly complex set of computer algorithms, blocks of coins are “mined” by users.
As more bitcoins are discovered, each new block will contain geometrically fewer coins than the last — 50% less every 4 years…until the last coin is found by 2140.
But much like precious metals or other foreign currencies, available bitcoins can also be bought and sold on the open market.
And in the last year and a half, demand for them has skyrocketed…
On November 30th, the price had soared to an all-time high of $1,156.06 according to Bitcoin price index CoinDesk — a staggering 11,400% jump from last summer.
To put that in perspective, if you bought just 10 bitcoins 18 months ago, you would’ve been able to rake in a cool $112 thousand bucks before the big December selloff.
Judging by the sharp price drop over the past month, it appears that many savvy bitcoin owners decided to cash it all in.
Sadly, for those who were unfortunate enough to buy at the top, their investments have evaporated.
The price now sits at roughly half of its peak (and has remained somewhat level for a few weeks now), which begs the question…where is bitcoin headed next?
Without a crystal ball, it’s quite hard to say for certain.
However, judging by the world’s growing interest level in this rogue currency, bitcoin appears to be much more than just a passing fad.
In all likelihood, the stabilization that we’re seeing since the recent sell-off suggests that there might be real support for this digital tender.
Exactly what kind of support does bitcoin have?
From law-makers to law-breakers, an increasing number of people are latching onto the virtual currency’s capacity as a legitimate method of trade.
Perhaps the most infamous adopter which firmly put Bitcoin in the global spotlight was Silk Road, a black market website which allowed sellers to hawk illicit drugs while buyers could pay anonymously with Bitcoin to get their fix.
Though the site has been shut down and similar sites have popped up since, the government remains optimistic that Bitcoin can do more good than harm.
Last month, Mythili Raman from the Department of Justice’ Criminal Division spoke in a hearing before the Committee on Homeland Security and Governmental Affairs.
In her statement, she acknowledged that although criminal elements tend to be major purveyors of virtual currencies such as Bitcoin, these new systems do offer legitimate financial services and have the potential to promote more efficient global commerce.
Retailers have certainly taken heed of Bitcoin’s prospective future, with a growing number of websites accepting the currency for product purchases.
This year, the 2nd annual www.bitcoinblackfriday.com flash sale site was launched with approximately 500 retailers participating – up from only a few dozen last year.
A quick scan of the online directory, www.spendbitcoins.com, will reveal thousands of sites around the world that you can regularly shop at using bitcoin.
Even larger businesses are coming aboard, as online giant Overstock.com recently announced plans to accept the currency as early as the end of Q2 2014.
But it’s not just e-commerce stores that are trading them.
A slew of merchant terminals and smartphone apps such as Coinkite and BitPay coming into the market even allow brick-and-mortar shops to handle transactions via Bitcoin.
And it’s with these Bitcoin service providers that I’m telling readers to keep a watchful eye on to help them gauge the demand and popularity of the currency itself.
You see, one of the biggest reason merchants are accepting bitcoins is that transaction fees are a fraction of what other credit cards and online payment systems like PayPal charge. In some instances, you can even transfer bitcoins for free.
Speaking of BitPay, Chinese business mogul Li Ka-Shing just made an undisclosed investment in the company with his venture capital company, Horizons Ventures.
It’s not entirely clear what Li intends to do with his stake, but it’s likely only a matter of time before other big players start jumping into the Bitcoin pool soon.
And when that happens, don’t be surprised if Bitcoin starts to spike again.