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Bitcoin, the online currency, hits record highs on the trading floor. Inside investor relations and security risks.
The infamous online currency known as Bitcoin is reportedly trading at an all time high. The currency, which was created by an anonymous hacker and online community closed at $49 on Wednesday. That is a significant increase since this past January when Bitcoins traded at a mere $13. Will Bitcoins become another boom and bust for investors?
Bitcoin Security Risks
Last months blog, Mega, Bitcoin taking eCommerce to next level, depicted a trading environment in which fraud was highly preventable. But preventable isn’t the same as saying Bitcoins are completely foil proof. Traditional banking institutions are insured and accounts are protected.
Yet exchange operators don’t employ the same level of protection. Nearly 24,000 Bitcoins were lost in transfer this past September. Cyber theft was to blame but the risks inherent in trading Bitcoins as online currency haven’t stopped investors from driving up the value.
To many, Bitcoins are a refreshing alternative to the US dollar, which continues to lose its value as the country racks up more debt. Early adopters see Bitcoin as a valuable investment, something that will protect the value of their money instead of threatening its cash worth. And in case anyone’s wondering, some sites will exchange Bitcoins into cash. Would you trust the online community with your hard earned dollars? Furthermore, can the Bitcoin hold its value in an unstable economy?
4 year old currency triples in two months
Many attribute the rather sudden success of Bitcoins to early adopters such as WordPress and Reddit, who gladly accept Bitcoin as valid currency. Online retailers and consumers alike have favored the currency because transfer fees are practically nonexistent. CNN money reported that one sizable transfer, worth $80,000 incurred a transaction fee of only 1.8 cents. Traditional banking institutions don’t have a chance to compete with that price.
Yet the fact that Bitcoins, which began trading at 5 cents in 2010 and have jumped to $49 in three years worries some. Why? Because a lot of speculators are going to jump on the bandwagon and drive up the price of Bitcoins until it crashes. It’s not like were talking about something magical. Bitcoins are just another form of currency, only they aren’t backed by traditional financial institutions and only exist online. Though Bitcoin supporters maintain that Bitcoin accounts are secure and difficult to attack. That is until you consider the series of cyber thefts that occurred in 2011 which sent Bitcoins plummeting in value.
