The Bitcoin is a virtual currency. The currency was created on July 17, 2010 by an unknown computer scientist with the stock of ‘coins’ growing according to a predetermined algorithm. At its launch, one Bitcoin exchanged for $0.05 (a nickel).
Untethered to any real asset, the Bitcoin’s price is determined purely by speculation on exchanges around the world. In the absence of any government intervention, a buying frenzy has sent the value of the total Bitcoin stock past $1.5 billion. The price of a single Bitcoin has doubled in less than two weeks. Having passed $100 on April 1, 2013, it peaked (so far) at $147 a Bitcoin on April 3, 2013, before falling back to $110.
The Bitcoin currency may grow in accordance with a predetermined algorithm, but it is nothing if not volatile with respect to price. A 2011 spike took the price of a Bitcoin from $2 to over $30 – and back again. Now, in the wake of the Greek Cypriot bank bailout fiasco, Bitcoin’s advocates are pitching the currency as an alternative to authorized currencies that can be devalued or confiscated at the will of political hacks.
All bubbles eventually burst and the Bitcoin will prove to be no exception. A major problem is that governments prefer a monopoly of theft. They do not relish competition in that lucrative activity. So if the Bitcoin gets too big for government’s boots, they will stamp down on it.
Gold, coin and bullion, still remains the preferred asset for those who do not place great faith in government.But do take delivery and hide your holdings from inquisitive government eyes.