Bitcoin is not for nerds anymore; it’s mainstream. It took the front page of the Financial Times – the UK’s largest investment newspaper – and has made thousands of appearances on media outlets online. But bitcoin is still a very mysterious subject. If you’re not familiar with the digital currency, there is a great guide to bitcoin on the poker comparison site, bitcoinpoker.org, but for those that are, here’s why you should care (and possibly worry) about the virtual currency.
Bitcoin creator, Satoshi Nakamoto has never been fully identified. It is expected that Satoshi is planning on remaining anonymous indefinitely, however there are reports that on creating the currency, he ‘mined’ millions of bitcoin (which would now be worth millions of dollars).
- Bitcoin is associated with some incredibly immoral goings on. A heavily encrypted online market place, The Silk Road, allowed users to buy and sell drugs and guns using this anonymous currency. A scary thought, and one that many governments are trying to keep a close eye on.
- Bitcoin is incredibly unstable; we have seen prices rise from $10/BTC to over $250/BTC in a matter of weeks. Speculators are thriving on this high risk, high reward investment and creating what appear to be small (or potentially huge) bubbles. Bitcoin is now a billion dollar industry, volatility like this is unheard of and incredibly dangerous for the personal wealth of thousands.
If you’re considering investing in bitcoin, small doses are recommended. There are legitimate reasons as to why someone would want to deal in the currency (low transaction costs for example), however storing significant volumes of real fiat money in this virtual world is highly unadvisable.
Thanks to the Europeans, one ounce of gold hit a 30 year record high of $1,600. That’s great news for those of you with a bit of scrap gold sitting in the loft – bad news for the rest of us; really bad news.
Rallying Gold Prices tied to Financial Collapse
Gold prices are fuelled by speculation and are heavily dependent on demand side economics. When a country’s (or in this case, a continent’s) economy is expected to take a hard knock, people rush to swap their fiat currency for something more stable. This could be converting Euros into Dollars or Dollars into Yen, but more common is the purchase of gold. Gold, unlike any fiat currency, is tried and tested and has been used in trade for centuries without coming unstuck. The security of gold is proven and it’s extremely liquid, making the demand for gold in economic recessions very, very high.
Where is the Gold Price Headed?
While the Eurozone is in the middle of a debt crisis that could force Greece into dropping the Euro altogether, the US is also faced with the possibility of defaulting on their debt. America has hit a debt ceiling that, if not raised by Congress, could cripple the US economy and the dollar. If Congress were to do the unthinkable and reject the move to increase the debt ceiling, the gold price will shoot up yet again as ‘capital flight’ takes hold. The dollar would be virtually abandoned by investors as it became more unstable than ever.
The continued Eurozone crisis and the problems that Italy are expected to bring to the Euro wil be likely to continue driving gold prices higher and higher over the next few months. While Italy looks to be the latest addition to the Eurozone crisis, the European fallout is by no means over as more underlying issues in other European countries have yet to rear their head.