If you thought that it was safe to go into the crypto-currency waters and start investing in bitcoin, think again. Trading in bitcoin at one of the largest exchanges, Mt.Gox, has stopped. As of this writing, trading has been suspended. This suspension has resulted in a massive crash of bitcoin prices from 783 dollars to 619 dollars. Thankfully, this crash has subsided somewhat, and the price is now up to 732. Regardless, this huge swing, 21% decline, shows how volatile crypto-currencies and bitcoin, in particular, can be.
There are three ways to make money off bitcoin. First of all, you can buy and sell digital stuff or services online taking bitcoin as payment. Second, you can mine bitcoin with your computer. As more and more people mine bitcoin, this is harder and harder to do. Still, given the fact that for every bitcoin your computer comes up with, you get paid 700 dollars. This is to some people worth doing. Finally, the third and the most common way to make money off bitcoin is to trade it like stock. Only a year ago, bitcoin was selling at 21 dollars. Now, bitcoin is worth over 600 dollars. That’s a huge increase in the value of your investment. This is why many people have shifted from stocks and foreign exchange to bitcoin. In some circles, it’s being marketed as a can’t-loose-type of investment. With that said, you really have to be aware that there are a lot of fluctuations with this type of investment. There are many risks. First of all, the exchanges where bitcoin is bought and sold can be attacked by hackers. Another problem is when, as in this case, the exchanges get hit with so many withdrawals that they have to shut down. Every time an exchange shuts down, the price takes a beating. Finally, there are also a lot of arrests for money laundering and other illegal activities by people using bitcoin. This can damage the crypto-currency’s public image and can cause the price to fluctuate. With that said, there are a lot of people saying that bitcoin is like gold. Instead of betting one gold, people trade their dollars and yen and euro and other paper currencies which can be prone to crashes in buying bitcoin instead. If you’re gonna play bitcoin this way, be aware of what you’re getting into. You would be getting into a serious roller-coaster ride of value. Right now, we’re at the 600 to 700 dollar range and who knows where we’ll end up.
Bitcoin is increasingly in the radar of government authorities, for example, China’s crackdown on bitcoin trades in December. It’s definitely gonna be interesting as more and more government starts to weigh in on crypto-currencies. Many governments and central banks don’t like crypto-currencies because they are untraceable, and they are intractable. Moreover, they are ways where citizens can come up with their own currencies outside of official channels. They represent a slap in the face to many central bankers who would like to control money flow within given economies.