In Biz: The Problem With Bitcoin

By Emily Overholt, Staff Writer
@EmilyOverholt

A lot of people are concerned with where Bitcoin is going, but would you invest in it?/ PHOTO VIA Flickr user Antana

A lot of people are concerned with where Bitcoin is going, but would you invest in it?/ PHOTO VIA Flickr user Antana

I’ve been pretty fascinated by Bitcoin for about a year now. Really, I was late to the party, but I’ve still got a good grip on it.

For those of you who don’t know, Bitcoin is a digital currency that is not backed by any form of government. Bitcoins are held in digital Bitcoin wallets and traded person to person for goods and services.

The mainstream media didn’t really latch on to Bitcoin until about December when it had a huge run, a single coin was worth as much as $1,200 a few months ago. Anything worth that much money gets media attention, that’s just how it works. The run didn’t last and coins are currently worth about $600.

But here’s the thing, it’s not worth it for me to tell you the price as I write this. It could be higher or lower just seconds from now. Sure, that’s the case with any commodity or stock. The price of gold fluctuates daily, but it’s fluctuating in cents not dollars.

Bitcoin had potential to be a great commodity, if not a currency. But before it becomes usable it has got to settle down. If I’m buying Chinese takeout for $10 I don’t want it to end up costing me $12 as I eat it because I didn’t wait for the exchange rate to drop.

There’s one other risk I’d be remiss to not point out: security.

Because Bitcoin is entirely virtual it is at a greater risk than any currency that lives in a bank. Bank robberies are rare, but hacking happens every day. Bitcoin trading platform MtGox suffered such extreme security breaches it has shut down and now faces Bankruptcy. Ouch.

I think Bitcoin is fascinating. I’m usually tweeting about it. But I’m not willing to put my money in something so volatile at this point. Then again, a wise economics professor once told me about stocks, “you can either eat well or sleep well, never both.”

Maybe Bitcoin could make another run, we’ll just have to wait and see.

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