The Economist: What If the Bitcoin Bubble Bursts?

Bitcoin is a digital currency with algorithms used for ownership and trades. Security depends on the secrecy of those algorithms. A purchase of $100 worth of bitcoin in July 2010 would be worth about $4.6 million today. Overall market value of such currencies is about $80 billion. An article from the Economist questions bitcoin’s sustainability and whether the currency is more like gold or 17th century tulip-bulb investments. The holders of volatile digital currencies can make ordinary purchase, while others are speculators. Some lack trust in traditional government currencies. Challenges include high transaction fees, systems with limited numbers of exchanges, and emerging interest of government regulators. But the currencies are also innovative and could disrupt even new technology leaders. The Economist concludes that Bitcoin and other digital currencies could be a healthy bubble if they pursue innovation and avoid criminal activity: “It is hard to argue that those buying cryptocurrencies are unaware of the risks. And since they are still a fairly self-contained system, contagion is unlikely.” – YaleGlobal