Bit­coin or bust?

The dig­i­tal cur­rency could be the way to the fu­ture, or a path to fi­nan­cial ruin

The Telegram (St. John’s) - - BUSINESS -

Bit­coin, hailed in some quar­ters as the fu­ture of cur­rency, is hav­ing a rough week. Plum­met­ing prices have again raised ques­tions about the wis­dom of own­ing it, if not its le­git­i­macy.

The dig­i­tal, or cryp­tocur­rency, tum­bled 15 per cent Thurs­day to about $3,300 against the dol­lar. Bit­coin, which has had bouts of volatil­ity in the past, has shed about a third of its value since Sept. 1. But it’s still up about $600 com­pared with last year at this time.

Bit­coin is a dig­i­tal cur­rency cre­ated and ex­changed with­out the in­volve­ment of banks or gov­ern­ments. Trans­ac­tions al­low anonymity, which has made it pop­u­lar with peo­ple who want to keep their fi­nan­cial ac­tiv­ity, and their iden­ti­ties, pri­vate. The dig­i­tal coins are cre­ated by so-called “min­ers”, who op­er­ate com­puter farms that ver­ify other users’ trans­ac­tions by solv­ing com­plex math­e­mat­i­cal puz­zles. These min­ers re­ceive bit­coin in ex­change. Bit­coin can be con­verted to cash when de­posited into ac­counts at prices set in on­line trad­ing.

In mid-july the value of bit­coin was around $1,900 per dol­lar, drop­ping from nearly $2,500 at the end of June. Users forced a change in the com­puter code, which was de­signed to im­prove ca­pac­ity on the in­creas­ingly clogged net­work. The ma­noeu­vre worked, help­ing to avoid a split in bit­coin and driv­ing the value up to roughly $2,800 by the end of July.

Bit­coin’s value has fluc­tu­ated since then. At the be­gin­ning of Au­gust bit­coin’s value stood at about $2,710 and shot up to more than $4,700 by month’s end. But there’s been a steady de­cline this month, with the value slip­ping to ap­prox­i­mately $3,300 on Thurs­day, ac­cord­ing to Blockchain.info.

One of China’s big­gest bit­coin ex­changes an­nounced that it will cease trades fol­low­ing

re­ports that Bei­jing will or­der all Chi­nese ex­changes to close. And on Tues­day, Jpmor­gan Chase CEO Jamie Di­mon called bit­coin a fraud, say­ing that if any of his traders were deal­ing in the cur­rency, he’d fire them.

Bit­coin tum­bled 6 per cent between Tues­day and Wed­nes­day.

In the U.S., the IRS has is­sued guide­lines on the cur­rency, call­ing it an “in­tan­gi­ble as­set” sub­ject to tax­a­tion. But in the end, cash talks.

Ac­cord­ing to IRS guid­ance: “Vir­tual cur­rency that has an equiv­a­lent value in real cur­rency, or that acts as a sub­sti­tute for real cur­rency, is re­ferred to as ‘con­vert­ible’ vir­tual cur­rency. Bit­coin is one ex­am­ple of a con­vert­ible vir­tual cur­rency. Bit­coin can be dig­i­tally traded between users and can be pur­chased for, or ex­changed into, U.S. dol­lars, Eu­ros, and

other real or vir­tual cur­ren­cies.”

And it’s a hotly pur­sued as­set by U.S. in­tel­li­gence agen­cies, which see bit­coin

as a fund­ing ve­hi­cle in some in­stances for groups or in­di­vid­u­als that in­tend to do harm.

STEVEN SENNE/THE AS­SO­CI­ATED PRESS In this March 31, 2014, file photo, Tim Mc­cor­mack, of Bos­ton, in­serts cash into a Lib­erty Teller ATM while pur­chas­ing bit­coins at South Sta­tion train sta­tion, in Bos­ton. On Thurs­day, Bit­coin tum­bled 15 per­cent to about $3,300 against the dol­lar.

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