The Price of a Bitcoin Continues To Soar
According to MT.GOX, which bills itself as the world's largest Bitcoin exchange, the current going rate for a single Bitcoin is $137.20.
Over the past two months, Bitcoins have increased dramatically in value. On February 2nd, 2013, the price of a single Bitcoin was around $20 USD. Two months later, and it would cost you nearly $140 USD to purchase one Bitcoin.
Before we delve into why Bitcoins have exploded in value (especially as of late), let's look at what exactly Bitcoins are.
Bitcoin is a global alternative currency that is entirely digital. Unlike the US Dollar or Japanese Yen, Bitcoin is completely decentralized and does not have a central issuing authority. Instead, Bitcoin is exchanged through an anonymous peer-to-peer Internet protocol.
Here is a snippet from En.Bitcoin.it as to how Bitcoins work:
"Bitcoin uses public-key cryptography, peer-to-peer networking, and proof-of-work to process and verify payments. Bitcoins are sent (or signed over) from one address to another with each user potentially having many, many addresses. Each payment transaction is broadcast to the network and included in the blockchain so that the included bitcoins cannot be spent twice. After an hour or two, each transaction is locked in time by the massive amount of processing power that continues to extend the blockchain. Using these techniques, Bitcoin provides a fast and extremely reliable payment network that anyone can use."
Thousands of merchants currently offer Bitcoin as a method of payment, and a number of large web presences, including Reddit and Wordpress, also accept the alternative currency as a form of payment.
For a more thorough explanation of Bitcoin, I would suggest visiting the Bitcoin Wikipedia page or En.Bitcoin.it.
Bitcoin has surged in popularity over the past couple of months, with many prominent publications giving the alternative currency some serious ink.
It's no coincidence that Bitcoin's recent parabolic rise has coincided with the recent events in Cyprus.
The recent events in Cyprus, which will result in depositors with more than 100k Euros in Cypriot banks losing substantial sums of money, have shattered the confidence that many people had in not only the Cypriot banking system, but also the banking system within the European Union as a whole. If this can happen in Cyprus, people wonder, could it happen somewhere else? There was a time during the negotiations between the "troika" (European Central Bank, European Commission, International Monetary Fund) and Cyprus that the possibility of seizing a percentage of insured deposits was floated (this was ultimately scrapped in favor of going after uninsured deposits).
Could something like this happen in the United States one day? Will something similar happen the next time that a member of the European Union needs a bailout?
Because of this loss of confidence in the global banking system, many people have flocked to Bitcoins in recent weeks, which has resulted in the price of a single Bitcoin surging from $20 to nearly $140. The surge is not the result of any sort of manipulation - it's a simple case of demand exceeding supply, and as long as the demand remains strong, there is really no telling where the price of a Bitcoin could go.
Filed under: General Knowledge