Bitcoin bubble masks the real value of virtual currencies

At the end of last week the price of bitcoin sat at just over $US9000, half its high of $US20,000 in December: that’s a huge drop in value in a short space of time; January was the virtual currency’s worst month since February 2014.

The recent sharp fall in the value of bitcoin is said to have been sparked by the South Korean government’s announcement it would crack down on the trade in cryptocurrencies (there are now nearly 1500 in a market worth around $680 billion). South Korea is the world’s largest market for this trade.

US regulators are increasing their scrutiny of the market, and Facebook has banned all advertising associated with cryptocurrencies, which the social network said are frequently “scams”.

The fall in bitcoin’s price also comes after a Japanese cryptocurrency exchange was hacked and $US400 million worth of virtual coins was stolen.

Bitcoin’s history lends the cryptocurrency markets a shady feel: it was invented in 2009 by someone using the name Satoshi Nakamoto, and originally used as money on the “dark web” site Silk Road for trade in illegal drugs and weapons.

Now there are stories of young gazillionaires who have large paper fortunes thanks to the rise in the value of cryptocurrencies (although their fortunes aren’t even on paper, but stored as bits and bytes in the virtual ledgers of the blockchain).

At the moment, the cryptocurrency universe feels like the wild west, beyond the rule of law and the control of central banks and governments, a place where fortunes are made and lost in quick speculation, and hucksterism is rampant. People who have never invested in anything before are piling into Initial Coin Offerings with the hope of making easy money.

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Source: Bitcoin bubble masks the real value of virtual currencies – Brisbane Times