Crypto-currency Bitcoin hit a major milestone over the weekend, as the value of a single coin reached a record-breaking $500 (R5 086) in value. South African exchange Bitx is currently trading at a whopping R5 500, making those who’ve invested in Bitcoins recently very happy – at the end of 2012, a Bitcoin was worth just $12, so the value has risen by almost 50 times in a year. There’s not many investments that can do that.
In just two weeks, over $200 has been added to the price, and the increase is nearing $400 over the course of the last month. That’s despite the fact that scammers in China just made off with R420m worth of innocent investors’ Bitcoins last week. As the overall currency is now worth around R60bn, even large losses like this struggle to affect the price.
If R5 500 seems a bit much as a single unit of currency to be useful – unless you’re buying an iPhone, which is now around two Bitcoins – don’t worry. Individual coins can be broken down into 100 000 000 pieces, known as Satoshis, for the smallest element of the currency.
Is this sudden surge in Bitcoin a bubble? It could be, but signs are that the currency is being taken seriously by many. In New York this week, authorities are considering licensing Bitcoin traders to regulate the market and protect investors who may get carried away by the media buzz.
Meanwhile, in China the currency is being taken very seriously. Investors there are putting a lot of money into Bitcoin, and it’s likely that this is what’s causing the rapid rise in value. It represents one of the few things you can do with your money that isn’t regulated by the government, or dependent on the unpredictable US economy.
In Africa, many are looking at Bitcoin’s potential for a role in development. With mobile money looking unstoppable, Bitcoin could easily sit alongside the likes of M-PESA for peer-to-peer transactions, but with far lower transaction charges than mobile operators or banks traditionally apply. Transferring Bitcoins between countries, for example, means none of those pesky capital controls that governments love are likely to get invoked.
Of course, the flipside is that confidence in a currency that’s based not on a physical resource or central reserve does mean that the value could collapse at any time, and there are still precious few things you can do with your Bitcoins in the real world. There is a Bitcoin ATM in Canada, however, which allows you to turn ‘coins in to local cash if you wish.
Is it time to buy yourself some Bitcoins, or with sky-high prices have you already missed the boat? We’ll be revisting the subject in some depth soon, in the meantime you can go along to one of the local Bitcoin group meet-ups to find out more, or post your thoughts below.