By: Dr. Lynn Reaser
Bitcoins, a virtual currency, whose quantity is set by a computer algorithm, is suddenly the rage. Speculative investors, hoping to reap large gains, have driven up the price of bitcoins from $13 in January to more than $1200. One bitcoin today is worth more than an ounce of gold.
Who is using them to buy things? While a Cypriot university is accepting bitcoins for tuition and Virgin Galactic is taking them for space travel, the currency is probably much too volatile to gain widespread acceptance for payments. Most companies are quickly converting them into cash or dollars.
Bitcoin’s risk of accommodating money laundering or of a precipitous drop with a bursting of a speculative bubble could well doom its existence. A currency’s worth is only as good as confidence in its value, and bitcoin confidence could be short-lived.
Fermanian Business & Economic Institute 