The last five days have borne witness witness to the bursting of a new bubble we saw inflate recently. This bubble is known as Bitcoin.
Bitcoin (sign: BTC) of course, is a decentralized[6] digital currency based on an open-source peer-to-peer Internet protocol. It was developed and launched in 2009 by a Satoshi Nakamoto (probably not his real name).
Following the debacle in Cyprus, the fear of a European meltdown that gripped investors led many to purchase Bitcoins as a way of possessing currency that would not be subject to bank deposit grabs the way it was done in Cyprus and may have to be done in Portugal, Greece, Italy and so on.
The value of this digital currency surged to a peak of $260 as recently as 5 days ago, from a value of $2 in 2011. As the market value of the total bitcoin supply approached $1 billion USD, financial commentators described bitcoin prices as a bubble.
On 10 April 2013, Bitcoin dropped from a price of $266 to $105 before returning to a value of $160 within six hours. CNET reported yesterday;
Mt. Gox, which handles three-quarters of the trades in the digital currency, announced a suspension of trading this morning after a rollercoaster trading day yesterday that saw Bitcoin’s valuation drop 61 percent before recovering a bit with a 37 percent loss. The decentralized digital currency, which had quadrupled in value in the past four weeks, traded as high as $266 per Bitcoin yesterday before a dramatic correction trimmed its value to $105. It eventually recovered to trade as high as $145 a Bitcoin.
Today, there was a further crash in bitcoin prices, dragging the price down to about $70 and losing many recent investors their shirts in the process. Where this market heads now is anyone’s guess, but I don’t believe bicoin will see $260 anytime soon.
What do you think?