Tiger Times

The Bitcoin Bubble

Fiona Irving-Beck, Staff Writer

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Bitcoin has recently received a lot of attention. This digital currency, also known as a cryptocurrency, was invented in 2009, but only gained significant traction and media attention in the last year. Bitcoin is earned through complex, computer-based calculations, a process called “mining for bitcoin.” During 2017, the value of bitcoin increased from under $1K at the beginning of the year to over $17K by December. Early bitcoin investors have made huge profits.

Bitcoin has been theorized to be a bubble, a phenomenon in which a product is sold for much more than its inherent value. It has been likened to past bubbles, such as the Tulip Bulb Bubble, the first recorded example of this phenomenon. It occurred in the 1630s when the price of tulip bulbs in Holland grew at an exponential rate. Bubbles, however, inevitably burst, so the bitcoin market is not invulnerable to a crash.

Bitcoin was designed to make transactions fast, inexpensive, and convenient for all users. However, now that the value of bitcoin is so high, transactions are anything but cheap. Originally, a transaction occurred quickly and cost less than a dollar. In December, transactions were slow and fees were as high as $28. Some companies, such as the digital video game distribution platform Steam, previously endorsed and supported bitcoin transactions but no longer accepts them. Due to bitcoin’s high prices, the transaction fees exceeded the actual price of many games.

Early on, bitcoin didn’t have the best reputation, and investors weren’t interested in it due to its association with illicit activities on the dark web (a portion of the internet that’s not indexed by search engines, requires special software to access, and allows users to remain anonymous). For the same reasons that companies like Steam don’t utilize bitcoin anymore, many dark web users have also opted out of using it. For example, “carders,” sellers of stolen credit cards, used to routinely trade in bitcoin. As reported by Brian Krebs, an investigative journalist, they are moving to other cryptocurrencies, such as Litecoin. Some alternative virtual currencies could potentially experience a rise in popularity similar to bitcoin’s, but only time will tell. Among the vast array of cryptocurrencies available, customers have many options to choose between. So, not to worry, if bitcoin’s bubble bursts, carders and users of the dark web won’t be hindered.

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The Bitcoin Bubble