Over the last several hours the online digital currency Bitcoin has experienced a sharp increase in value relative to the US Dollar. With the cost per Bitcoin currently hovering at around $46.63 (USD) the currency is reaching unknown territory.
10,863,700 Bitcoins x $46.63 = $506,574,331
What’s driving this increase in the value of Bitcoin? Similar in some ways to paper fiat currencies Bitcoin offers little in the way of intrinsic value. The value of the currency seems to rely mostly in the ability to use it as a means of exchange; something that Bitcoin is getting better at by the day.
Bitcoin has experienced a recent surge of acceptance by large sites such as Mega, Reddit, and most recently NameCheap. What’s more is that a whole slew of online merchants have sprung up recently that accept Bitcoin. Sites like BitcoinStore and BitcoinIn are looking to become the Newegg and Amazon of the Bitcoin world. And as far as those sites that don’t accept Bitcoin go, there are a number of creative solutions popping up. BitSpend, AmazonBitcoins, and PizzaForCoins all allow you to pay for your purchases via Bitcoin at retailers that don’t yet accept it. Much of the growth has been built off of services such as Coinbase and Walletbit which make it easier for merchants to accept Bitcoin and translate it to Fiat.
This increase in acceptance by online merchants is driving up the perceived value of the currency resulting in less users interested in selling what they currently hold. Likewise, announcements by major sites and services are bringing a whole new group of users to Bitcoin helping to fuel the demand. Watching MtGoxLive over the last few weeks and months I’ve seen a large stack of buy orders and fewer sell orders. Simply put the demand for Bitcoin is increasing faster than the supply.
Bitcoin will only ever have 21 millions coins, of which over half are in circulation now. This finite supply has helped to set off a digital arms race in Bitcoin’s specialized hardware industry. The emergence of ASICs (application specific integrated circuit) built solely for Bitcoin is also seen as a strong indicator of the growth of the technology.
It would seem nearly impossible for Bitcoin to continue on it’s current growth trajectory. Still, there is a massive amount of potential as more and more sites begin to weigh the advantages and disadvantages of accepting Bitcoin. There might even be a MegaCard in the works.
If you have a tip or story that you’d like considered please shoot me an email at cryptojunky at zoho dot com.