Bitcoin’s Big, Dumb Week

Photo: Tomohiro Ohsumi/Bloomberg via Getty Images

Bitcoin, the cryptocurrency that is either going to send your child to college or bankrupt you, is having a hell of a week — reaching huge new landmarks, breaking its own exchanges, and making a lot of people very anxious. Over the last few days alone, the value of a single bitcoin has doubled, creating (theoretical) millionaires and billionaires the world over.

As it stands now, at the moment of publishing, a bitcoin is worth about $15,000, a huge return for anyone who “mined” the currency three or four years ago. (Bitcoin, of which a finite amount exist, are created by solving very complex math equations using computer processing power, a process known as “mining.”) So, theoretically, if someone gave you 3 percent of a bitcoin in 2014 — when it was worth $19.14 — because they had no use for it, that chunk of cryptocurrency is now worth around $470 (thanks, Eric!).

Why has the worth of a bitcoin risen so astronomically in the course of hours? A primary reason is that two financial organizations, Cboe Global Markets and CME Group, will start offering bitcoin futures later this month. That means Wall Street institutions might be pouring a lot of money into bitcoin-related financial products, further legitimizing the digital money.

In tandem with this, many people are now seeing significant theoretical returns on their nominal initial bitcoin investment. That is, in turn, encouraging people to try to get in on the action now, increasing demand for bitcoin, and thus increasing the price. Bitcoin speculators are taking a gamble.

Depending on who you ask, bitcoin is the next big thing in money — decentralized and protected from the volatility of the financial market — or just another form of wealth storage whose value is only defined by the exchange rate with the U.S. dollar. Swiss banks are apparently very excited about it, while volatility in the market has other bankers deciding to wait and see. There’s also the fact that 1,000 people own 40 percent of the bitcoin market, making it very easy to manipulate.

In the meantime, other places gave bitcoin a chance and decided that it’s just not worth it. Valve, which runs the video-game marketplace Steam, announced that it was no longer accepting payments in bitcoin, owing to volatility and transaction costs. In the meantime, Coinbase, one of the world’s largest cryptocurrency exchanges, shot to the top of the iOS App Store charts and briefly halted transactions, as it buckled under the surge in traffic.

So should you buy bitcoin? I mean, I guess? Up to you! Hope this helps.

Bitcoin’s Big, Dumb Week