bitcoinchart121
The value of Bitcoin has skyrocketed in the past five days. Graph via Bitcoincharts.com.

bitcoin_logoIt’s Bitcoin-madness today.

On the same day the U.S. government began discussions about Bitcoin, the value of the digital currency is skyrocketing.

Bitcoin’s value hit $900 on Mt. Gox exchange around 5 p.m. PST Monday, up more than 70 percent from Sunday’s close and setting an all-time high in the process. But, it also just dropped to $650 within the past 30 minutes, highlighting the current volatility of Bitcoin. The value of Bitcoin only hit $400 for the first time last week, and $500 for the first time on Sunday.

Today’s spike is likely due to The Department of Justice noting that Bitcoins can be “legal means of exchange,” and U.S. Federal Reserve chairman Ben Bernanke writing that Bitcoin “may hold long-term promise,” even though he said the Federal Reserve has no plans to regulate Bitcoin.

If you aren’t familiar with Bitcoin, it’s the emerging decentralized, virtual currency gaining popularity lately in light of the FBI shutting down Silk Road, the online marketplace for illegal drugs and illicit services. Bitcoins exist only online, can be transferred right away and are not controlled by a central authority like the Federal Reserve.

We recently wrote about a Seattle grilled cheese foodtruck that is now accepting Bitcoin and also noted how the world’s first Bitcoin ATM was just installed in Vancouver, B.C.

Up to this point, it’s been unclear how or if governments will try to regulate the system. But today’s news certainly indicates some hope for those in favor of digital currency.

Here’s a good place to learn more about Bitcoin and how it works.

Update, 6:25 p.m. PST:

Now, Bitcoin is trading at around $770 an hour after dropping from $900 to nearly $600. Madness!

Comments

  • AstroKev

    It’s maybe a bit ahead of itself, but not really madness. Let’s do some simple analysis. Bitcoin has survived:

    – Anonymous authorship scrutiny

    – At least 40+ hacks/heists of various sorts and/or websites (https://bitcointalk.org/index.php?topic=83794.0)

    – Illicit use for commerce — money laundering, silk road/drugs/etc.

    – Potential for government regulation (though today mostly I mostly heard that’s maybe not coming)

    – Numerous lawsuits with companies involved with BTC

    – Various media attacks, mostly around ‘Bubble’.

    No startup would ever be able to withstand all these things. But BTC isn’t a startup. It’s the essence of what makes the internet work: Open source collaboration.

    Plus, it’s definitely going to cause grief for some industries. Visa, MC, FDC are high on the list, but maybe even moreso Paypal, Western Union or similar exchanges. They will have to find some addons to continue to make reasonable money there or become exchanges themselves.

    Adoption currently is pretty low. Shopify is a pretty big one that recently announced support. And companies like coinbase are enabling more merchants. Forget about things like Square, Coin, and all these others in the mobile payment space — why not just show a QR code to xfer some BTC. Why bother with Amazon credits, Facebook credits, blah blah virtual currency when there is one that’s shared by all?

    Plus, for digital goods, BTC is a natural fit. Imagine buying media, reports, 3d printer designs, blah blah blah — a natural fit. And no issues with currency conversions from country to country.

    BTC is definitely here to stay. The only question now is which companies will embrace the change, vs. fight against it?

    • Truthfull

      Call me old fashioned but while promise is all at this point it can really offer. You DO realize that the ENTIRE concept of currency is a fictitious or real but albeit limited amount of items based upon PHYSICAL COLLATERAL. Currencies come and go as nothing is permanent, all current currencies are based upon the Gold standard. They individually entitle someone to said however amount of Gold in the event a currency goes bust. BitCoins are only held up by other currencies.

      THIS IS WHAT MAKES THEM A SPECULATIVE BUBBLE OR ESSENTIALLY A NEW FORM OF CREDIT where one’s value is only limited to the amount of demand and interest created. Which is what’s dangerous. There could be a Billion dollar value per BitCoin given market demand and value. This is not far-fetched as there is nothing to regulate it but greed and desire (the cornerstones of Capitalism) and in that alone if some wealthy kid in Japan or London decides for an hour that he wants to corner the BitCoin market by hoarding a vast majority. The value increases or inflates. The issue is if BitCoin is to stay like the above claims or would like, the inherent volatility would destroy society and economics. As no one wants an investment or currency that can go from $1 to $32 to $900 to $400 in the course of a couple months, let alone a day.

      Without a tie to a physical collateral like maybe silver or diamonds, there IS NO WAY this will become a viable currency for long term use.

      • Neverfox

        Your mistake (and some of the blame goes to the Bitcoin community itself referring to them as “currency”) is in assuming that Bitcoins aren’t themselves collateral as a result of their properties. Bitcoin’s competition as money is gold, not any currency. Take a look at what makes them attractive and the list will start to sound strikingly similar to (and in some cases surpassing) the list one would compile for a metal like gold (or silver to a lessor degree). Have you taken a look at the historical volatility of gold in US$? Not exactly calm waters.

        • Truthfull

          I understand the point you’re attempting to make but you must realize that nothing of physical value outside of goods and services also valued by the BitCoin itself, will ever change hands. The fact changes the volatility from something manageable to something bordering upon pure risk. Gold is always independent in its value and in its volatility, but most of all, its tangible.

          BitCoins are like trying to make a currency out of IP Documents. Each intellectual property has its inherent value but the value isn’t based in anything tangible, only that which RELATES to tangible worth. Our current level of technology is not foolproof enough for a completely intangible value system. You give money, gold, barter for goods and services. Tangibles. Noone in our current sphere of technology can support a fully automated yet intangible system, as the tangibility is, in reality, the first form of regulation.

          • Neverfox

            You’re trying to fit Bitcoins into a dichotomy that is insufficient precisely because Bitcoin now exists; it breaks the tight correlation between “I can touch it (tangibility) and “I’m at the end of the chain of evaluation.” Unlike IP Documents (e.g. patient portfolios), Bitcoins get their value from their own properties. To say the same of IP Documents would be to claim that they get their value from the paper they’re written on or the words they use, which, of course, isn’t the case. The tangible/intangible dichotomy worked because no one had any example of something that couldn’t be touched but, because of its design, could behave exactly like something such the ultimate tangible asset, gold.

          • Truthfull

            What? That was by far the most incorrect slew of justification I’ve ever seen. First, like most tech oriented individuals you make it seem like BitCoin is ENTIRELY a new concept when in reality AT BEST its simply the revamp of old speculation theories and derivative concepts. Much like the cellphone is still just a telephone and texting is just a vamping of the telegram and telegraph. BitCoins have no inherent value but that which is given to them, LIKE ALL FORMS OF EXCHANGE. The difference is again that OUTDATED dichotomy, that you find so obviously passe` contributes greatly to the longevity of that which is financial because like anyone that actually has involvement in financial markets will explain, economics in regards to currencies, stocks and other things of speculation is all about perception. People will always perceive that which is tangible as more steadfast than that which is not and from a philosophical and social standpoint the moment humanity is no longer burdened by this dichotomy money or currency itself would not be necessary, at all.

            Lastly, regardless of how intelligent you believe your premise (and this is not an attack levied at you, as much as the shortsightedness of your stance) as I said prior our level of technology, with hackers, war and destruction, EMP, et cetera. The currency itself is not backed by ANY PROPERTY THAT EXISTS IN REALITY, AND AS SUCH CANNOT BE CONSIDER AS ANY MORE THAN A PAYMENT OPTION. Otherwise the Global Economy would adopt it fully. Regardless of how much you kick and scream, BitCoin WILL NOT BE ADOPTED WITHOUT THE PHYSICAL SECURITY OF SOME PHYSICAL MEANS OR REPRESENTATION OF VALUE.

            FYI, Intellectual properties or patent portfolios have no value at all unless the invention or method they represent has value. This was the application of my metaphor. A dollar HAS NO VALUE outside of the amount of Gold Bullion in mint it represents. Much like stocks or corporate shares have no value aside from the PROFITS of the CORPORATIONS THEY REPRESENT. BitCoins REGARDLESS of YOUR argument or their inherent sophistication only have VALUE representative of their scarcity, demand and the relative value found from correlation between them and the local currency of whomever is looking to purchase them. Its no different than the value placed upon aspects of EVE Online or Second Life where people are willing to pay for said objects, so they are in turn valuable. The only added benefit is unlike those games you can make real world purchases, somewhat. Still it is this connection to ACTUAL CURRENCY that gives BitCoin it’s “properties” you are so quick to explain. As without actual or traditional currency or some physical representation of value, in what respect or how would you then value your BitCoins?

          • Truthfull

            Also if you do more research, you’d find that in 1929 and 2008, the precise same thing took place with consumer credit and financial markets. Speculation without tangible proceeds relative to and consistent with TRUE value is what caused both of the most extreme economic disasters known to man. The first was unchecked speculation in regard to stocks, the second was unchecked speculation in regards to real estate and now you’re proposing the third, unchecked speculation in regards to currency.

            Without tangible proceeds EVERYTHING is merely forms of speculation, which is the economic term for credit, when an investor moves upon or receives money in relation to that value.

            If BitCoin is going to succeed as a TRUE alternative, someone is going to have to centralize the monetary value of it, with something that can be removed from it.

          • AstroKev

            Uh, whatever. I just picked up a new vehicle with some BTC. That’s pretty tangible to me. So, like I said, some will embrace change… others might not.

      • http://theseonut.com/ Adam

        Wait, so all the paper money our government keeps printing has physical collateral? I seriously doubt it.

        • Truthfull

          Yes it does. All of the Federal Reserve & Fort Knox bullion covers the amount of physical cash in circulation. The remainder is a hedge against our interest assets and our purchased debt.

          • http://theseonut.com/ Adam

            Are hedges against interest assets and purchased debt physical collateral? I’m not trying to argue or be sarcastic – it’s a serious question.

          • Truthfull

            Well “Hedges” financially, are for the same purpose that their agricultural namesakes are, to limit erosion. Just Hedges operate fiscally for financial reasons, whereas actual hedges help to retain topsoil.

            Now that we understand what Hedges are, lets elaborate in the proper context. They are simply investment tools, usually not offered tobthe general public, established and overseen by financial institutions and insiders regarding numerous financial markets. Their key attribute is their inherent properties of diversification, as they are meant to purely stabilize and promote consistent growth, due to erosion in this context being analogous with financial loss.

            For EVERY investment the best method to shore up loss or guarantee an investment against risk is to provide or seek out collateral. This is why banks request monies down on all sorts of large purchases and also why if one does not pay in full for said purchase, our legal and financial system both allow partial ownership in a sense to allow the possibility for loss recuperation in worse case scenarios. This basic principle of fiscal responsibility is throughout all aspects of finance and economics. The majority of Hedge Funds are foxused upon currencies, bonds and other commodities, of which are the more physically secured of available financial investments.

            While financial markets often skirt the outside edge of these principles by accepting collateral of a physical nature that often will represent something else even more tangible. But if you go through or down the line enough ALL investments must be secured by physical collateral and currency or digital currency is no different.

  • Guest

    Congrats to bitcoin on the great day! This is fantastic news for the Seattle teconomy.

    • Jeff Furlington

      This instability isn’t good news for Bitcoin. It’s currently extremely unsafe to buy and then spend bitcoins because you can lose big in the time between the purchase and spend.

  • Chris

    This drop was predicted by the bitcoin gambling guide back in October

  • Kirk Hilles

    It’ll have huge spikes both ways. Watch it today and it’ll be all over the place. $508 now, but could be back up to $700 later today and then down to $400. The key is to not try and time it. Find a “good” price and buy and hold. Have money available when it hits lows and otherwise, buy BTC on a regular schedule. Maybe you’ll get amazing “deals”, maybe you’ll overpay. The key is to start increasing your ownership of them.

    • csh5

      Good call. I’m starting to place just a small amount of my paycheck into bitcoin every month.

  • Serg

    bitcoins your time has come

  • The Hemcher Cup

    Oh my God, BitCoin is up! Oh my God, BitCoin is down! It’s up! It’s down! Who cares!!!

  • Guest

    If you have money you want to lose, give it to me, rather than investing in Bitcoin & Tesla!

  • http://remarksremarks.blogspot.com/ Lawrence J. Kramer

    BTC are too volatile to hold as a medium of exchange. They are a payment method, converting money in my account to money in your account using a device other than a checking account or credit card. But you have to buy them only when you need them and redeem them as soon as you get them, unless you want to speculate in them, which is has nothing to do with using them as a medium of exchange.

    Remember, a medium of exchange exists to allow you to sell a violin on Monday and buy a cruise ticket on Tuesday. You cannot do that with BTC, All you can do with BTC is sell a violin on Monday OR buy a cruise ticket on Tuesday, but if you try to use the BTC you got for the violin on Monday to buy the cruise ticket on Tuesday, you may find that the ship has sailed.

    Let’s suppose, though, that this volatility problem is just “early days” stuff, that for some reason BTC acquire a stable enough value that one might actually hold them while looking for something to spend them on. Because the supply of things is growing faster than the supply of BTC, the currency will deflate (rise in value) quite quickly. Why would you spend you BTC when you can spend your dollars, which are eroding. Yes, your vendor may insist on being paid in BTC, but so what? You can buy them on the spot to make the deal and leave yours growing in value in your wallet. That’s basic Gresham’s Law. Trouble is, if everyone is hoarding their BTC, how do you get some to trade with? Might as well just use the dollars…

    Gresham’s Law pretty much says that the worst acceptable money will circulate. If the dollar become unacceptable, something stronger will replace it. But just because something stronger comes along does not mean that the dollar will become unacceptable. The strongest currency is hoarded and the weakest circulates, so long as it remains currency. BTC is too strong for its own good. It will always be hoarded so long as it is limited in quantity and does not grow with the supply of goods and services. That’s what did in gold, even with fractional reserve bank-made “gold” money. BTC cannot even offer that much flexibility.

    At the end of the day, BTC is a great science project, a wonderful demonstration that scarcity is the key to moneyness, i.e., “backing” is just evidence of scarcity, and not an essential feature of money, which is why fiat money is not doomed so long as its issuers provide adequate information to support the perception of its scarcity.

  • bvdonjuan

    I made good money on that insane ride up. Played it well, but the price is still high enough to where you can easily get burned if you don’t hold long enough for the price to come back. Last June I bought 30 bitcoin with 3k. I now have 4500 in my account. Had I just held and sold at the top…. I would be at 27k. Still content with my gains.

  • bvdonjuan

    Long term, bitcoin is still a bargain.

  • Mark Able Jones

    I wonder whether bitcoin’s exchange price is based on actual supply and demand or just some program designed to go higher and higher. There’s no reason the BTC value should be going up right now.

    • miffy900

      The Bitcoin protocol is designed to limit the number of coins generated to a specific, hard number of around 35 million Bitcoins, and the closer you get towards that limit, (i.e. as more Bitcoins are in circulation), fewer Bitcoins are created every time the block chain is updated.

      Now as more people start to see Bitcoin as a get-rich-quick scheme, more people want a piece of the Bitcoin pie – but coins are being generated slower as time goes by, and it’s this huge demand that is pushing the price up so high.

      • Mark Able Jones

        I know all that. But there’s been a lot of negative press regarding BTC lately and nothing positive. Nothing to justify the demand. If anything, BTC should be falling like a rock. It’s not. That’s suspicious.

        • Neverfox

          Have you looked at the atrocious quality and lack of understanding in of most of that negative press?

          • Mark Able Jones

            Even Bitcoin’s recent price jumps point to its volatility. Bitcoin deserves every bit of negative press, and then some.

          • playtilltheend

            Bitcoin isnt for the tuck tail and run crowd, but for the people with a set and some cash. its a hell of a ride for the big kids who love to play! 175 BC bought at $31. Mark, fill my new Vette up with premium, Im going out for some fun!

  • james wrider

    Outstanding website you someone. Do you already get Bitcoins? I would propose to write up at who-accepts-bitcoins.com. They module make the reciprocation you status as their database is oftentimes searched by bitcoin spenders. It’s unconstrained though!

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