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Bitcoin buzz stays high — even after bubble

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Bitcoin lost more than half its value last month but there’s more interest in the cyber-currency than ever. While Bitcoin stories used to be restricted to tech and science sites, they’re now a fixture of the financial press and even consumer news sites.

Last week, for instance, brought a fresh spate of news that suggest more people are treating Bitcoin as a serious form of money rather than a science fiction experiment. Here’s a roundup (if you want to meet people backing Bitcoin, come to our free meetup in San Jose on May 16):

Bitcoin is becoming more liquid

Gift card site Gyft has started accepting Bitcoin as payment. The significance here is that average consumers now have a forum to use their Bitcoins on a wide variety of familiar consumer brands. As Techcrunch noted, other merchants’ Bitcoin announcements (like that San Francisco cupcake shop) are largely marketing gimmicks; the Gyft news creates a real source of practical liquidity.GigaOM meet up BitCoin

This development also coincides with the arrival of mini-machines that convert cash to Bitcoins and the first ATM for the currency in San Diego.

Real investors are starting to take Bitcoin seriously

Last month’s collapse, which saw Bitcoin fall from $266 to $105 in a single day, rattled speculators and undermined faith in the currency’s viability.

But that hasn’t deterred investors — including big and respected ones like Andreessen Horowitz — from putting more money into new BitCoin ventures. This week, the WSJ reported that Fred Wilson’s Union Square Ventures is investing $5 million in Coinbase, a service that provides an online wallet and easy conversion between BitCoin and traditional currencies.

Bitcoin is getting easier to understand

BitCoin discussions were once the province of quants, libertarians and cyber-geeks. Now, people are explaining how the currency is made and how it works in easy-to-understand stories. Last week, for instance, Forbes reporter Kash Hill kept a day to day diary of how she lived on BitCoin (albeit with difficulty) in San Francisco for a week.

Meanwhile, Wired’s Robert Macmillan offers a cogent account (including a video) of how his office now has a Bitcoin machine quietly mining away while using less power than the coffee maker.  (For an excellent general primer on BitCoin, see my colleague David Meyer’s “Yes, you should care about Bitcoin, and here’s why” from last month).

The government wants a piece of Bitcoin

Despite its newfound respectability, Bitcoin is still catnip for criminals, hackers and market manipulators. This notoriety led the financial crimes division of the Treasury Department to issue guidelines about Bitcoin and money laundering.

Now, Commissioner Bart Chilton of the CFTC — the agency that regulates futures contracts  — says he’s thinking of regulating BitCoin. Chilton cited the currency’s volatility and  said the government should make sure it’s not a “house of cards.”

Regulation will be tricky, however. As I explained last week, Bitcoin’s status as a currency, not a security, means it’s beyond the purview of the SEC. And while the CFTC might regulate some types of Bitcoin transactions, its overall power is limited.

“Only derivatives. We can regulate any Bitcoin future, option or swaps. I’ve not said we could regulate the actual currency–although for all I know some might have reported such. The currency could be regulated by Treasury or the Fed,” Chilton said in response to an email query.

Meet the engineers and entrepreneurs behind Bitcoin

On Thursday, May 16, GigaOM is hosting experts — including CEOs who use Bitcoin everyday as well as engineers from Facebook(s fb) and Google(s goog) — to explain where Bitcoin is going next. The meet-up, which costs exactly zero Bitcoins thanks to our friends at Ribbit Capital, is taking place at the San Jose Tech Museum from 6 to 9 — with time for cocktails and networking.

16 Responses to “Bitcoin buzz stays high — even after bubble”

  1. lol Learn how to anaylze what you read. It’s indisputable that both markets have tracked nearly identically INITIALLY. I wasn’t saying bitcoins are identical to tulips. The S&P 500 also had an INITIAL track similar to both. And you can mine bitcoins all day. Just because you don’t know how to do it isn’t my concern. Most of these comments are ridiculous lol Bitcoins main usefulness lies in the anonymity. There is very little risk in short-term purchasing using btc and like any long-term investment they carry a risk. It’s no big secret.

  2. I have an awesome Idea for that could help a lot of people.

    If the digital currency is properly married to the postal service (lets say they start offering a special service for making Bitcoin transaction via mail.) It fixes two issues at once. First the U.S. postal service is complaining because it’s revenue is so severely reduced it’s flat broke. This would help revitalize a vital industry, while second cementing in the real world use and acceptance of digital currency and gives a stable ground for the value of BTC to grow on. It would even put more control of the value of all digital currency in the hands of the people.

    Who thinks this might be an effective route?
    Craigslist already covers the selling and buying of items for BTC. It just needs to become a more common way to trade.

  3. Shawn Behnam

    It is interesting that so many people comment on this site about bitcoins and not only a few comments on other articles. There’s definitely interest in bitcoin whether you support it or not.

  4. Jamie Anderson

    OK the tulip analogy may not be the best one. Tulips aren’t as ephemeral and at least you can plant a nice garden if nobody wants to buy them. Bitcoins have no value other than the perception of the market.

  5. Chris van Loben Sels

    What’s so weird is that I’m totally satisfied with getting my money from U.S. Dollars. The Fed has done a pretty nice job with the dollar in some of the most difficult circumstances. In my lifetime (and looking back a couple of generations), I have never seen wide speculative swings in my currency and have never had trouble finding people who accept it.

    Why, exactly, is everyone rushing to solve a problem I don’t think I have?

    Moreover, sudden herd movements in the market are one of the most dangerous things to a currency’s value, so why would I want to replace the Fed with, um, a suddenly moving herd market?

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  6. Enough of the Tulip comparisons. No, you’re not as clever as you think you are. I think the best comparison is Silver. Silver has always had value and continues to have tremendous value, BUT, it spiked up to $144 (inflation adjusted) in 1980 and dropped down to under $15 a couple of years later. Bitcoins WILL be here for ever, but there is no guarantee of what the value will be. People believe it’ll go to $1,000+. Maybe it will. Maybe it’ll drop back down to $10. Definitely possible as well. Is it worth risking a small percent of your portfolio? Sure. Is it worth betting the farm? Depends on what happens if you lose the farm. Theft is a MAJOR issue as well.

  7. I wonder what would happen if a real currency would follow the bitcoin route, in other words, instead of printing money, the reserve bank of that country will create their currency the way that bitcoins are created. Should make for an interesting case study and lessen the maintenance cost associated with the real currency.

  8. Danielle Eber

    The article says “Bitcoin lost more than half its value last month”. This is incorrect. It started April at $95 and ended the month at $135. Yes, it fluctuated wildly during the month, but only mentioning the drop from Apr 10 to Apr 16th and neglecting the rises from Apr 1 to Apr 10, and then Apr 16th to 25th is biased reporting.

  9. Reblogged this on A Different Lens by Ryan Dahlke and commented:
    Bitcoins are no tulip bulbs. I knew bitcoins were going to stay alive and well after the crash because the bitcoin network is impervious. When paper money or other commodities become worthless so does its maintenance and control. The item is then abandoned. Paper money requires large amounts of regulation. Gold requires extreme amounts of storage and protection. Bitcoin doesn’t require any of that. Bitcoin is essentially effortless to store, effortless to granulate, effortless to verify, and effortless to transfer. As long as there a is functioning internet, bitcoins will continue operate the same no matter what happens to the market even if there isn’t market and that is why the buzz around bitcoins is still high today.

    • Jamie Anderson

      Yes, every time I read a bitcoin article I spend the next hour trying to get the song “Tulips from Amsterdam” out of my head. It’s very annoying.
      “This time it’s different”. That’s what they said about every bubble/ponsy scheme since the tulips.

      • Stanley Mcstanley

        The tulips analogy works as long as you forget that anybody can grow tulips. Try growing bitcoins then get back to us.

    • Amos Bairn

      > “Bitcoins are no tulip bulbs. I knew bitcoins were going to stay alive and well after the crash because the bitcoin network is impervious.”

      Tulips stayed alive after the crash, albeit at a far lower value than during the bubble. They are an important part of Holland’s economy today.

  10. I just got several hundred dollars worth last night for nothing but moral purposes lol The thing that people don’t seem to get about bitcoins is that on a short-term span i.e. an exchange for purchase, there is very little risk and as for the long-term outlook, I’ve made a ton of money off of them, buying substantal quantity at $2 a btcoin. Their current trend follows two other well known indices… the Dutch tulip market way back in the 1600’s and the the opening salvos of the NASDAQ. Check it. Peace!!!