Bitcoin Hits Speed Bumps in Quest for 'Respectability'

Thursday, 18 Apr 2013 11:51 AM

By Dan Weil

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The virtual currency known as Bitcoin has endured a roller coaster ride in recent weeks, leading some experts to question its viability.

The Bitcoin surged to $230 April 9 from about $50 in mid-March. But it has plunged since then, registering an intraday drop of 39 percent Tuesday. The currency traded at $93 Thursday morning.

Bitcoin users basically create the currency themselves through “mining,” which amounts to solving a difficult mathematical problem with computer servers.

Editor's Note:
 
Economist Warns: ‘Money From Heaven a Path to Hell.’ See Evidence.

Some businesses use the currency, but many experts are dubious about its fate given that it’s not backed by a central bank, The Wall Street Journal reports.

"I think there are some businesses that offer legitimate goods that like the concept and like the cachet of it," Beth Robertson, a senior consultant with Javelin Strategy and Research, tells the paper.

That hasn’t dimmed the enthusiasm of many in the technology community. They welcome a recent memo from the Treasury Department that readies the process for regulating firms involved in the virtual currency market.

"The industry is happy about this guidance, even if it imposes a regulatory burden, because it is an indicator of respectability," Behnam Dayanim, a lawyer at Paul Hastings, tells The Journal.

Washington Post blogger Neil Irwin sees two huge obstacles for the Bitcoin. “First, because it has the endorsement of no government, it will never be usable for official transactions,” he writes.

“Second, the cap on the supply of Bitcoins may reassure people that there will be no inflation, but in fact it ensures that it can never go into widespread use.” Bitcoin supply totaled about $994 million Wednesday morning.

Editor's Note: Economist Warns: ‘Money From Heaven a Path to Hell.’ See Evidence.

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