Currency or Investment Vehicle? Either Way - Bitcoin Is Rising In Value

Bitcoin might  be here to stay - but its bubble will burst (more than once)

Currency or Investment Vehicle? Either Way - Bitcoin Is Rising In ValueYou might have read of few of my recent articles on the subject of crypto-currency--specifically, Bitcoin. The reason I keep going back to the subject is because I find it endlessly fascinating. I mean, times sure have changed since my early childhood in Kansas. I used to earn extra money collecting cans and I didn’t know anybody with cable or a home computer.   Nowadays almost everyone has cable (review previous articles on saving money by cutting cable) and millions have computers with internet access.  Now, we have a world wide digital currency.  Since this new type of currency has no country to call home, in theory, anyone with a computer could have access to it.

In my opinion, the ever expanding availability of crypto-currency around the world is probably what has been driving up the price as of late.  People seem to believe the currency has merit, but it might take some time to pop the bubbles and establish itself as a stable trading currency (commodity?).

New Chinese investors driving up the price?

The oldest Bitcoin site in China is called BTC China and was recently the subject of an article by Tech Crunch. The article Currency or Investment Vehicle? Either Way - Bitcoin Is Rising In Valuestates that BTC China just secured a $5 million dollar cash injection from Lightspeed China Partners. The CEO of BTC China said the money will be used for   “general operating expenses”, and to “aggressively grow and expand the business”. I guess this means they want to greatly expose Bitcoin to potential investors in China who may not have heard of it yet. This could potentially drive the price up even further to unknown levels before the eventual crash that is bound to happen.

Does Bitcoin behave more like a currency or a commodity?

This is a question that many have tried to answer and usually end up saying it is somewhere in the middle. Because of its potential for daily volatile price fluctuations (I just witnessed it go from $800 to $890 and then down to $659 in matter of minutes on the Cryptoticker app), the use of the Bitcoin as a type of fiat currency will always be limited. Why is that? The reason is someone is most likely to get the raw end of the stick no matter what the transaction. The price could go up or down in either direction any hour of the day, seven days a week.  This isn’t necessarily a good thing if you charge set prices for your goods or services.

Example:

If you want to run a coffee shop that accepts Bitcoins, you might have problems before you can convert them to cash.  If you charge the equivalent of $5 worth of Bitcoins for your coffee and the price of Bitcoin drops 20% on the day you just accepted $250 worth of the crypto-currency...you have just lost $50. It tends to make it difficult to meet set bills such as utilities and payroll when you never know what the price will be before you can cash out.

The meat of the potatoes

Whatever force is driving up Bitcoin’s value seems to have taken hold of the market at this time and there is no end in site. Can it move past the price of gold? Can it double or even triple the price of gold? The answer to both of those questions is a resounding yes. The value could just as easily be $1 as it could be $5000 (it was $808 at the time of this article being posted on 11/18/2013). The value will always be determined by those who want to purchase it and/or any time it makes the news circuits. This bubble will have to burst at some point, but until that happens it looks like countless investors could jump on board the Bit-train (or Bit-wagon, take your pick) for the ride of their lives.

 

Update 11/19/2013 :

There are also many other coins very similar to Bitcoin out there known as Alt Coins. You can find several of them such as Devcoin (Devcoin Wiki) on Coinchoose.com

Major breakthrough? Federal officials indicate that Bitcoin might have long term value. Advise that it could become part of the overall financial landscape of the future.

Check out the current Bitcoin chart.

Photo credits : Pixabay, Cryptoticker app screenshot  (taken 11/18/2013)  and a screenshot of BTC China logo taken from their website.

About Zimmy

Hello, my name is Zimmy (I am the one on the left) and I will be one of the resident bloggers on MoneyandPotatoes.com, I would like to introduce myself. I am a married father of two and live in a modest house in the great state of Texas. We have a great need in our household to manage our income wisely because only one of us can work full time due to both of our kids having special needs. Over the years I have been called “cheap” and a little “frugal” by my wife and I have to say I resemble those remarks.

Comments

  1. The value has to be tied to some underlying currency value, so I fail to see the net benefit in adding in that layer versus simply paying in the currency value. But I'm probably behind the times in that regard. I know it has value to be used in illegal activities, but since I don't do the stuff that it was being used for in the most recent report, that's one element I can't speak to!
    Money Beagle recently posted...Why I Will Not Miss Blockbuster VideoMy Profile

    • Yeah, I think the majority of people investing in Bitcoin are simply trying to do a quick flip for profit. I honestly can't see the majority of people using it simply because the dollar is easier to use and already accepted everywhere.

  2. I heard today about a fast food outlet - one location anyway - that is accepting Bitcoins. That caught my attention! Anyway, this concept just might have legs, but I'm not sold on it at this point. Not sure we're ready for it.
    Tie the Money Knot recently posted...The Freeloader HusbandMy Profile

    • I think if businesses jump into this thing a little too quickly they might make an accounting nightmare for themselves come quarterly tax time. They should wait until the proper programs are out there to make accepting the currency more feasible.

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