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Bitcoin Hits New All-time High of $32
Sabbetus writes "Bitcoin tops its previous all-time high of $31.91 and in doing so it proves to be quite a resilient virtual currency. To the supporters of Bitcoin this does not come as a surprise, since we have seen the likes of WordPress, Reddit and Mega embrace it. Recently Namecheap also confirmed that they will start accepting bitcoins. The new record price was reached on the same day that Mt. Gox, the world's largest Bitcoin exchange, reached an agreement with CoinLab to manage the exchange's operations in the U.S. and Canada."
A far cry from the end of 2011.
You can thank online gambling, where the big news is that some sites are taking BTC so americans can play again.
Surprise, surprise, it continues to show some utility when dealing in illicit goods and services.
In the bitcoin equivalent of losing loose change in your couch, one of my old hard drives has 4 mined bitcoins on it somewhere. They are rapildly approaching a value high enough for me to stop being lazy and ressurect the machine.
Of course they're being hoarded.
One of the key issues with bitcoin is the ultimately limited supply.There are about 10.5 mln into existence, mining continues, and over the upcoming century or so it's going to grow to 21 mln. So that means the first half is there already.
Normal money (USD, EUR, whatever) can be created by banks through lending. This keeps the value of currencies in check, and actually over time decreases the value of a currency, as seen by inflation. The good thing of inflation is that it keeps people from hoarding cash, as hoarding cash means you're losing value.
Assuming uptake of use of bitcoin continues to increase, there is more and more demand for the coins, and there is limited new supply. Supply goes down over time (by design), and more uptake will naturally cause more loss: people keeping bitcoins on their computer, not properly keeping backups, computer breaks down, bitcoins lost. Not sure if there is any way to recover them. And people may take bitcoins and forget about them, another cause of loss. So more and more people want bitcoins, but there is only a limited number available - and that number may indeed decrease over time - causing the price to go up.
Now there are two problems this almost guaranteed increase in value of the bitcoins.
First: people start hoarding them, as speculative investment. This takes more bitcoins out of the payments market, pushing up the value.
Second: it is going to cause deflation in the value of services that charge bitcoin. Imagine a web site sells accounts for 1 bitcoin. That is currently $32 in real money. So people will have to buy bitcoin at $32 each, and the web site can sell those bitcoins at $32. But next year the bitcoin is at maybe $64. That would double the price of the account, which is probably not good for business, so the website compensates for this by changing their price to 0,5 bitcoin. Especially if such a site gives an option of paying in bitcoin or paying in USD, they must adjust prices to keep them equivalent.
People owning bitcoin see the value of the bitcoin in USD (money they can actually spend) go up, while at the same time for everything they could use bitcoin for, the prices go down. Where a donation of 1 bitcoin now would be worth $32, the equivalent donation next year would be only 0,5 bitcoin. Buy a bitcoin now, and the web site account next year would effectively cost you only $16. And the other half bitcoin you could sell at $32, making the account free.
And this is how I call bitcoin an interesting concept, but terribly defective by design.
Valuation of bitcoin, or BTC, in other sovereign currencies isn't the point here - neither is 'cashing out' or any of that nonsense. The end-game here is to supplant and possibly replace sovereign currencies entirely. It may seem overly ambitious, but from all the financial scandals and other daily scams that are perpetuated by the banking and financial industry - people are getting *sick* of how the current system operates.
Edge exchanges will dominate for a while, but as things change, and end-to-end supply chains form that are BTC denominated, the conversion demand will change and people will be able to keep their entire activity within the BTC realm. This is important, because then true monetary freedom has been achieved. Nobody telling you what you can spend your money on, or stipulations as minimum balances or hours of operation.
This is the biggest revolution in finance taking place right in front of you, and most commenters here dismiss it out-of-hand.
I was interested in the technical workings of BitCoin and what the user experience was really like, but I just couldn't wrap my head around it without, you know, USING it. So I purchased about $40 worth of BitCoin via Western Union to one of the exchanges. At the time, that net me about 3 BTC. I started playing around with it, transferring it from my PC wallet to my phone wallet... getting an idea of how transfers went. It was an interesting concept "loading" my phone with BitCoin from my PC "safe" and then carrying that around with me. Then I started looking for things to do with it... I got on BitMit and purchased a few Steam games, some USB cables... All at a pretty hefty USD discount. And it was pretty neat just scanning a QR code and bam, payment sent. Granted the USB cables haven't arrived yet because they're shipping from China... But, whatever.
After actually SPENDING it, I decided to start accepting it at my GunBroker auctions. PayPal doesn't (knowingly) handle transactions related to firearms or firearm accessories, and a lot of buyers were interesting in this "BitCoin" thing. An instant way to transfer funds with almost no fees? Yes please. Unfortunately, most of them got stuck at obtaining it, much as I would be confused about how to obtain Euros if someone accepted only Euros. So far, no one has paid in BTC.
However, I am seeing more BTC accepting auctions out there, which corresponds to its value increasing. That's pretty neat.
I don't plan on keeping my money in BTC, as I don't trust it that fully, but I've gotten comfortable enough with getting money in and out of BTC-land that the transactions have become pretty fluid. Right now, my only concern is its volatility. It sucks to buy something for the $20 USD equivalent and then having it arrive when that $20 worth of BitCoin is now worth $50 USD. It works for me, though.