Two Steps Forward, One Step Back for Bitcoin

A pile of Bitcoins are shown here after Software engineer Mike Caldwell minted them in his shop on April 26, 2013 in Sandy, Utah. Bitcoin is an experimental digital currency used over the Internet that is gaining in popularity worldwide. 
National Journal
Laura Ryan
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Laura Ryan
Dec. 6, 2013, 5:58 a.m.

Bit­coin hit a few speed bumps this week, slow­ing down the mo­mentum it gained after its pos­it­ive re­cep­tion by the Sen­ate in mid-Novem­ber.

China, the Bank of France, and Former Fed­er­al Re­serve Board Chair­man Alan Green­span all warned about the risks and volat­il­ity in­her­ent in the di­git­al cur­rency Thursday, send­ing its value plum­met­ing.

Chinese au­thor­it­ies re­stric­ted Bit­coin trans­ac­tions at Chinese banks, on the same day the Bank of France warned traders of the high-risk nature of the vir­tu­al money, re­ports the The Wall Street Journ­al. Of­fi­cials cited con­cerns over fraud and fin­an­cial sta­bil­ity.

“Even if Bit­coin does not today meet the con­di­tions to be­come a cred­ible means for in­vest­ment that could there­fore threaten fin­an­cial sta­bil­ity, it rep­res­ents a clear fin­an­cial risk for those that hold it,” the Bank of France stated in a re­port.

Bit­coin’s value dropped 30 per­cent from a re­cord high of $1,240 to $870.

Green­span said the di­git­al cur­rency is not money, in an in­ter­view with Bloomberg Tele­vi­sion.

“It’s a bubble,” Green­span said. “It has to have in­trins­ic value. You have to really stretch your ima­gin­a­tion to in­fer what the in­trins­ic value of Bit­coin is. I haven’t been able to do it. Maybe some­body else can.”

Bit­coin’s value reached a mile­stone last week when it hit a re­cord high fol­low­ing fol­low­ing the two Sen­ate hear­ing on the di­git­al money, which said Bit­coin is a “le­git­im­ate fin­an­cial in­stru­ment.”

A New York Times art­icle Thursday said that Bit­coin is the equi­val­ent of the “fin­an­cial wild west,” without rules or reg­u­la­tion to pre­vent fraud and gov­ern­ment activ­ity. Al­though the vir­tu­al money is be­com­ing more main­stream, it will likely be viewed as “sus­pi­cious” un­til it be­comes more stable.

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