Proclaims Bitcoin’s Tipping Point
Photo Credit: CNN
Declaring that Bitcoin has reached a “rite of passage,” Fortune.cnn.com is reporting that investors around the globe are pouring money into Bitcoin in anticipation that some day the virtual currency will be adopted by regular consumers.
From the article:
“Bitcoin has reached a rite of passage. The four-year-old virtual currency was once dismissed as something of a fad that only gangsters and drug dealers used, but in recent weeks, it has found new sources of credibility. Increasingly, investors from the U.S. to China are betting that the alternative currency could some day benefit regular consumers.
On Monday, bitcoin soared to a new high of $700 (it rose to $900 overnight), after senior law enforcement and regulatory officials highlighted the benefits of virtual currencies at the first ever congressional hearing on such monetary instruments. Mythili Raman, acting assistant attorney general, said virtual currencies are legit and “have the potential to promote more efficient global commerce.” And even though they aren’t backed by a central bank, Federal Reserve Chairman Ben Bernanke echoed similar sentiments, writing in a letter to senators that virtual currencies “may hold long-term promise, particularly if the innovations promote a faster, more secure and more efficient payment system.”
The same day, news broke that BTC China, the world’s largest bitcoin exchange by trading volume, secured $5 million in investments from institutional investors Lightspeed China Partners and Lightspeed Venture Partners.
The developments signal a shift. Just last month, federal authorities busted an online drug ring called Silk Road, which used bitcoin for all transactions. The bust prompted a major sell off; bitcoin declined by 20% after the website was taken down. It might have been hard to believe then, but the crackdown was probably the best thing that happened for the currency. It helped clean up bitcoin’s shady side, bringing it closer to the mainstream financial system.
Since the Silk Road crackdown, bitcoin has made huge gains, and whether it flourishes in the U.S. isn’t really the issue. In recent weeks, China has overwhelmingly driven up the price of bitcoin. About a third of the currency’s transactions now flow through the BTC China exchange, which is open only to Chinese users, according to Bitcoin Charts, which provides bitcoin data. BTC recently unseated Tokyo-based Mt. Gox as the world’s largest exchange by trading volume, and executives say it plans to use its latest round of funding to “aggressively grow and expand the business.”
Why the bitcoin love in China? It’s surprising Beijing hasn’t intervened, as the Chinese government generally keeps a heavy hand over its economy. Bitcoin is volatile, but its price has gone up more than 30-fold this year.”
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