For years, anarchists, drug dealers and dollar bears have all been searching out an alternative currency to the US dollar. Now some think they have found it in bitcoin.
Bitcoin, called a “digital currency,” has really caught on. A recent Bloomberg poll showed that 42 percent of Americans know what bitcoin is.
Bitcoin has lots of mystique, it’s high-tech, it’s very complicated, it’s anonymous, and it’s run by a network of decentralized computers that are located around the world.
Oh, and it’s sexy: It has the Winklevoss twins as believers. And there is a San Francisco-based company called Coinbase, a “bitcoin wallet” company that just received $25 million in funding led by Chris Dixon of Andreessen Horowitz, the Venture Capital firm headed by Netscape founder Marc Andreessen.
But bitcoin’s value is wildly volatile — 10 percent to 30 percent daily moves are common. The believers want you to think it’s the next big “currency,” like gold or PayPal. It is like neither.
A computerized IOU chit with no central oversight authority, bitcoin has all the makings of a high-tech Ponzi scheme.
In what may prove to be a knockout blow to Bitcoin, China banned financial companies from accepting Bitcoin, saying it isn’t a currency with “real meaning.”
At the end of the day, bitcoin is the creation of an anonymous person or persons that, while technologically interesting, offers no safe haven for money.
The top 100 bitcoin cryptologic addresses control 22 percent of all bitcoins, so imagine if a few want out.
About the only benefits of bitcoin are for money launderers, drug dealers and other cheats, due to its anonymity.
One more thing: The Federal Reserve could barely keep ATMs working in 2009. What’s going to happen when there’s a run on bitcoins?
And there definitely will be.