Friday, February 28, 2014

Bitcoin of Bit-Conned?

Article originally published on Kupeesh!

bitcoincrumble

I predict the price of AMD video cards is going to plummet soon.  Why?  because thousands of hopeful geeks were willing to pay 50% over retail for the chance to get in on the coin mining craze.

Armed with their asics and algorithms, coin miners spanning the Internet devoted real resources to something eminently virtual.  Bitcoin, LightCoin, Dogecoin and all the rest were dealt a blow today.

Mt. Gox, a major player in the BitCoin phenomenon and regularly making the list of the largest exchanges has a problem.

Somebody managed to walk away from the exchange with some 744,408 Bitcoins.  That many coins disappearing has caused a major crisis of faith among the community and found the value of the virtual currency falling to less than $500 in just 24 hours.

bitcoin charts
Bitcoin believers are usually the first to point out the fact that most FIAT currency values are based on little more than faith.  Most fall silent, however, when they have to admit that the value of their currency is entirely based on good intentions with little more to secure its value.

Those intentions were apparently misplaced in the case of Mt Gox with its books now bleeding red to the tune of over 118 million dollars (USD) in FIAT value.

The Mt. Gox theft has led to the resignation of its CEO Mark Karpeles from the board of the Bitcoin Foundation in an attempt to restore trust in the currency.  Still, you can’t put the cat back in the bag and the public trust has been shaken.

A currency that has seen a value as high as $1200 USD in November 2013 dropping under $500 after the Mt. Gox incident would be like the value of the U.S. dollar being halved because somebody robbed a Chase bank branch.

If what was once one of the largest Bitcoin exchanges can’t secure its own holdings it’s doubtful the currency will be able to shake off its geeky roots to gain public acceptance.

Bitcoin futures are always uncertain but a violation of investor trust may mean it never rises above the status of a store gift card.  You know, the ones with the fine print that says, “No Cash Value.”