Bitcoin continues to spike in the wake of Cyprus
People gather in front of Laiki (Popula) Bank as the country's banks re-open following 12 days of closure on March 28, 2013 in Nicosia, Cyprus. Amid the banking crisis in Cyprus, an online-only currency called Bitcoin is getting new attention.
Whenever a big economic crisis happens, investors usually flock to the safety of gold or U.S. government bonds. But the banking crisis in Cyprus brought another store of value to the fore -- Bitcoin, an online currency that’s seen a notable surge in price over the last few weeks.
"With these capital controls in place, there is a need for an alternative investment vehicle to transfer wealth, and Bitcoins are serving as that medium of transaction right now," says Christopher Vecchio, a currency analyst with Daily FX.
The online-only Bitcoin has no centralized exchange and is unregulated. As a payment method, Bitcoin is very limited with only a handful of websites and businesses that accept it.
"It's more a currency for the hacktivists if you will, people who are heavily involved in technology and on the cutting edge of computing," Vecchio says.
Many Bitcoin observers see its recent rise in value as bubble waiting to burst. Vecchio says the increased attention will lead to the currency’s regulation, which could cause Bitcoin’s price to take a hit.
Click on the audio player above to hear more about the future of Bitcoin, who uses it, and why.
How big is the Bitcoin economy? By some calculations, the currency is actually a billion-dollar industry. On March 28, 2013, the peer-to-peer virtual currency's total value exceeded $1 billion. That amount surpasses the value of the entire currency stock of countries like Bhutan and Liberia.
Where did Bitcoin come from? On January 3, 2009, Satoshi Nakamoto, a Japanese mathematician, created Bitcoin because he wanted a currency "immune to the predations of bankers and politicians."
How is the price of Bitcoin decided? In the early days of its existence, a small group of users who traded the currency on forums decided its price. Today, people can use real currencies (like the U.S. dollar) to buy the virtual currency on real-world exchanges. These exchanges decide Bitcoin's price based on what people are willing to pay. Mt. Gox is the largest of these exchanges. If you're interested in obtaining bitcoins, here's a site.
Where can I use my Bitcoin? There are several sites that list places that accept the currency directly. One website that may be considering accepting the virtual currency: OKCupid. There's a website where you can hear Bitcoin transactions in real time through sound. University of California student Maximillian Laumeister created the "Listen to Bitcoin" website, which creates chime sounds for every transaction on the network.