Bitcoins have been all over the news during the last year. Although most do not even understand exactly what a Bitcoin is, the skyrocketing values of the new currency have forced many investors and business people take notice. As they’ve gained more mainstream acceptance, serious investors have poured tens of millions of dollars into the new currency. Overnight, Bitcoins have made millionaires out of many, as the volatile cryptocurrency has soared in value for most of the past year. However, Bitcoins have also caused quite a stir among regulators, been closely associated with criminal organizations, and most recently, caused hundreds of millions of dollars in losses to their investors as their largest exchange disappeared from the internet.
The role Mt. Gox played in the evolution and acceptance of Bitcoins cannot be underscored – in 2013 it was estimated that Mt. Gox handled approximately 70% of all Bitcoin transactions. Signs point to a security flaw in Mt. Gox being responsible for the loss of approximately 850,000 Bitcoins, but with no comment from the exchange, its far from certain what happened. This uncertainty, coupled with looming regulators, has understandably shaken investor confidence, causing the value of Bitcoins to abruptly tumble by almost 50% in a matter of days, their lowest levels since November of last year.
While much of the news surrounding Bitcoins has been decidedly negative of late, as always, many investors see opportunity in chaos. With Mt. Gox out of the way, there should be opportunities for new exchanges and smaller players to rise up, and for investors willing to take the risk, this could be a good time to buy up Bitcoins. Some actually view the exit of Mt. Gox as potentially a good thing, as it may clear the way for more sophisticated players to enter the market. The high volatility of Bitcoins is also an opportunity from a speculator’s point of view, as rapid changes in their values present more opportunities to generate profits by trading. Obviously, these opportunities come with high levels of risk, but for investors who can tolerate such risk, there could be large paydays ahead.
So what’s next for Bitcoins? Will they fade into history, or emerge as a legitimate currency? Was the exit of Mt. Gox a good thing in the long run? How will regulators eventually deal with Bitcoins? Will Bitcoins eventually be an accepted mainstream currency? The answers are far from clear, but you can be certain that Bitcoin must evolve if they are to survive.
UPDATE: Mt. Gox has officially filed for bankruptcy.