Oct 6, 2014 Posted by AGA Editor

Price of Bitcoin Tumbles

The price of Bitcoin fell nearly 20 percent this weekend to its lowest level of the year, prompting worries of a crash. It’s no surprise to us. You have a “currency” that is backed by nothing and created from nothing. Where do you think it is going to go?

On Sunday afternoon, Bitcoin was trading at about $300, up from a low of $286, according to CoinDesk, a virtual currency website.

Some contend that Bitcoin’s price is irrelevant and that it does not reflect the virtual currency’s true value. Bitcoin is still most popular among speculators and technology enthusiasts and has yet to find a general use that will push it into the mainstream and help stabilize its price.

Bitcoin’s recent price decline can appear jarring, but it is nothing new. Indeed, some say the wild price swings have hindered the virtual currency’s widespread adoption.

Since it was introduced in 2009 by an anonymous programmer, the price of Bitcoin has fluctuated unpredictably. After reaching its peak of about $1,150 late last year, the price has been in a prolonged slide. In August, a flash crash briefly set the currency world on edge, as the price dipped on one exchange to just over $300 from nearly $500. Bitcoin ended that day down about 12 percent.

One reason for the drop could be uncertainty over potential regulations. In July, New York became the first state to propose regulations for Bitcoin companies. The comment period for the regulations, which were introduced by the Department of Financial Services, is set to end on Oct. 21.

Bitcoin has attracted the attention of a number of other regulatory agencies in the United States, including the Consumer Financial Protection Bureau, the Securities and Exchange Commission and the Internal Revenue Service.

What do you think about Bitcoins future when the government gets a hold of it?

Some say simply that the market has been distracted with other events, including the Alibaba Group’s initial public offering and the recent surge in the United States dollar.

Right now, Bitcoin is in this transition stage where it’s a commodity trying to become a currency. However, you must understand that a “Bitcoin” is not an actual gold coin. It’s a virtual currency. You don’t own any gold. And as we always say, if it’s not in your hands you don’t own it.

Ultimately, all money is based on trust. Aside from the folks who prefer to base the value of their assets on the hard work of Russian gold miners, most Americans trust dollars because we have some sense that the U.S. government isn’t going anywhere and is somewhat accountable to us. It’s hard to trust a monetary system concocted and managed by anonymous hackers who aren’t answerable to anyone.

Bitcoin still offers a glimpse of a future in which the dollar is digitized: No more wasted money printing paper and coins, and instead of stimulating the economy with handouts to banks, the government could just download money onto your USA Cash Card. But we won’t want to cede control of our future currency to profit-seeking financial companies or give the government any more ability to track our purchases than they do with cash.

In the end, your trading your bitcoins for dollars. Assuming, of course, that the dollar has any purchasing power left by the time we want to cash out.

Are you awake Yet?