Bitcoin – Collapse or Correction?

Here’s a chart from Mt Gox, a Bitcoin exchange, showing Bitcoin’s value for the past month. Following a spike which saw Bitcoins trade for over $1200, the price would appears to have stabilised at around $500 – $600 the value it has had for most of the past month.

But throughout 2012, the crpytocurrency  traded for less than $15, and prior to 2009 it didn’t even exist.

This week’s fall in Bitcoin value was prompted by a further clampdown by Chinese authorities.  A few weeks ago China had declared that Bitcoin was a commidity, not a currency:

“It is not issued by a central monetary authority, it does not have the properties of legal currency and it is not a currency in the real meaning of the word.”

Economist Paul Krugman, says that Bitcoin’s value may be a result of “self-fulfilling expectations” and points out that fiat currency is backed up by “the fact that you pay taxes with it”.  In this video from Business Insider, he suggests that it may have some value in untraceability, but he thinks that its current valuation is being driven by the fact that it “sounds impressive”.

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• The Long-Term Case for Bitcoin
• Is Bitcoin a Viable Currency?
• Podcast with Gabriela Avram of 3DCamp