Bitcoin Forum

The Bitcoin market is booming.
The internet's favorite virtual currency is up over 230 percent since the beginning of the year and up 40 percent from Monday to Wednesday alone.
The latest leg up may be because it looks like the market may finally be going mainstream – now, U.S. banks are getting involved.

When incremental adoption meets relatively fixed supply, it should be no surprise that prices go up. And that’s exactly what is happening to BTC prices. What’s interesting to note is why BTC prices plummet, which they did in the back half of 2011. The cause was a very short-lived hack attack on one Bitcoin “Wallet” company out of Japan, which caused the price to drop from $27 down to $2 in a few months. Confidence in money as a store of value is the ultimate driver of its value, both in the cyber and real worlds.

I have no idea which way Bitcoins will trade in the next 2 days or 2 years, but the whole process of starting a new Internet currency is a great case study in how real people use real currency. Limiting supply has clearly been a huge plus for the BTC. Becoming known as a currency for illegal drugs and gambling is more problematic, of course. But let’s not forget that the U.S. Treasury printed 3 billion $100 bills in the 2012 Fiscal Year. Most of those (the Federal Reserve estimates 80%) go overseas and many of them simply facilitate the global drug and arms trade, not to mention tax evasion and human trafficking. So the BTC’s growing role in the same types of business might qualify it for “Reserve currency” status sooner than anyone thinks.