In case you missed it, Bitcoin, the digital currency that’s captivated governments, speculators and techno-biz media types in recent months, lost nearly half its value late last week.
The trading price recovered some ground Monday. But before you consider buying in on the dip, with most expert opinion fingering the digital money as a sure-fire bubble, it’s perhaps best left alone (though as Global’s 16×9 has learned, acquiring some Bitcoins isn’t all that easy).
READ MORE: Bitcoin – Volatile and surging
The forces behind last week’s collapse in value — which took the price of an individual digital coin to below $600 from a high of more than $1,100– hail mostly from China, where recent investor interest has been hottest.
Concerned about the impact the unregulated currency could have on the country’s financial system, the People’s Republic banned Chinese financial institutions from accepting Bitcoin transactions last Wednesday. Later in the week, Baidu, China’s primary search engine, said it would no longer accept payments in Bitcoin as well.
Speculative investors were back at it on Monday, bidding up the price to close to $900, according to Mt. Gox, a main online trading platform (see chart). But as governments and banks – including here in Canada – apply greater scrutiny, the sudden surge could end just as spectacularly, experts warn.
Created in 2009 by an anonymous programmer or group of programmers under the name of Satoshi Nakamoto, there are 12.1 million Bitcoins in circulation that exist entirely online.
Individual units of the digital currency have traded for pennies or a few dollars apiece between mainly technology enthusiasts and early investors betting on digital currencies to take off.
This year, the combined value of the units has surged to more than $10 billion, as Bitcoin has won wider acceptance among companies and investors as a form of payment as well as an investment vehicle.
But the eye-popping rise smacks of instability, and if concerned governments crush confidence in the currency’s viability (creating a stampede to the exits among big holders), the bubble will pop as quickly as it has inflated.
“A word for the wise,” BMO economist Sal Guatieri wrote in a recent note, “while hoarding can push prices up, un-hoarding can have the opposite effect.”
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