The price of Bitcoin has fallen 15 percent in the wake of the virtual currency being called a “failed experiment.” Bitcoin was invented in 2008 by Satoshi Nakamoto, and later released publicly in January 2009. The idea behind Bitcoin was an open-source currency that could be used to make transactions anonymous; Bitcoins are only identified by numbers and contain no personal information. However, there have been some hiccups with the idea of Bitcoin, with the latest being the fall in Bitcoin prices.
According to CoinDesk, the sharp drop in Bitcoin prices began on Tuesday, and since then the price drops have only accelerated. As of the latest data, 1 Bitcoin is equal to $369.76 U.S. dollars, an all-time low for the virtual currency. As with many new technologies, some businesses were hesitant to accept Bitcoin as a form of payment for goods and services. They may have a good reason also: the price of this so-called “cryptocurrency” has fluctuated wildly over time, and is capable of changing price nearly 10 times as fast as the U.S. Dollar within a short time period.
In addition to a drop in price, Bitcoin has also experienced other issues. The anonymity of the service has led to its use in illicitly purchasing goods such as unregistered firearms or drugs on the Deep Web, whose activities cannot easily be tracked by authorities. Additionally, Bitcoin can be hacked from the outside, allowing hackers to digitally rob innocents of their currency. These may be some of the many factors that has played a role in the fall of Bitcoin prices.
Bitcoin prices have also likely been affected by the difficulty in acquiring and using the currency. One option to obtain Bitcoin, called “Bitcoin Mining,” can be dramatically affected by the change in Bitcoin price over time. Bitcoin Mining can be summed up as using special software to solve mathematical equations, for which one gets Bitcoin as a reward of sorts. As Bitcoinmining notes, the mining process is intentionally made difficult so as to stabilize the amount of Bitcoin by miners. As the price of Bitcoin goes up or down, the mining process may or may not be worth the effort put into it by miners.
As with any commodity, the less Bitcoin is desired, the more Bitcoin price and value will fall. Some businesses do accept Bitcoin as payments for goods and services, though they are usually few and far between. Unlike Dollars or other paper currency, Bitcoin has no banks or central governing body to regulate its price.
While deregulation may sound like a good thing, the problem is that Bitcoin price fluctuations can be difficult to control. It’s likely many businesses will not want to invest in a currency whose price changes quickly and sometimes without fair warning. Another factor for this sharp drop in Bitcoin price could be the fact that Bitcoin is somewhat unknown as it is more or less an “underground” currency, and is illegal in several countries including Russia and Thailand.
Crypto Coins News reports that the Bitcoin exchange rate increases each time Bitcoins are purchased, and inversely falls every time Bitcoins are sold. Though there is no government control over Bitcoin’s prices, the system polices itself by only producing a certain number of Bitcoins every year. Thus, the price of Bitcoin also depends on how many users are looking to buy or mine it at any given time, another factor that adds to its volatility.
[Image Via Jeff Chiu/AP Photo]