Bitcoin’s 2,000 PERCENT Rally Frightens The Fed
CHART OF THE DAY: Is Bitcoin A Bubble?
Here’s what the chart looked like just 2 months ago on January 27. A nice move off the collapse lows of $2, some stability at $5 for several months, then a nice ride to $16 over a six-month period.
Now check out the ridiculous action since January 27.
Behold the spike below — from 16 to 72 in less than 2 months, and from 2 to 72 in 18 months.
CHART: Bitcoins Priced In U.S. Dollars
Bitcoin has surged in the past 24 months, recently peaking at $72.50 after a 2011 low of $2.14, according to data from Mt. Gox, the world’s largest Bitcoin exchange. The money, a virtual currency issued by a decentralized network of computers, has shown new strength and acceptance since collapsing in vallue from $30 to $2 in 2011.
And the Fed and ECB are getting nervous.
An increase in the value of bitcoin, the world’s largest online currency, may fuel concerns that virtual money could undermine the role of central banks.
Greater demand for virtual currencies could have a negative impact on the reputation of central banks, according to a report published by the European Central Bank in October last year. Since the report was released, use of the currency has surged.
Bitpay Inc., a bitcoin payment processing company that recently raised $510,000 in an investment round, this month announced that the number of companies using its services has increased almost 50 percent to more than 2,000 since November, when blog management firm WordPress.com said it would accept the digital currency.
“I think the ECB obviously is concerned, and it’s not reputational,” said Steve Hanke, a professor at Johns Hopkins University in Baltimore who helped to establish new currency regimes in countries such as Argentina and Bulgaria. “I think it’s a competitive threat. Maybe virtual currencies will be so convenient that they will pose a threat because of their ease of use.”
Virtual currencies “could have a negative impact on the reputation of central banks” if their use grows considerably, the Frankfurt-based ECB said in its research paper. “This risk should be considered when assessing the overall risk situation of central banks.”