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An optimistic theory of Bitcoin as a 'hedge against the entire global currency system'

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Bitcoins (Casascius)
Bitcoins (Casascius)

Businessweek has a thoughtful and well-written defense of Bitcoin, the open source virtual currency that approximates cash on the internet. Writer and programmer Paul Ford points out that the Bitcoin experiment, so far, is working: it's actually being exchanged as money, and the underlying technology has proved "to be impeccable and completely functional." He makes a persuasive point that Bitcoin is "no more arbitrary than derivatives or credit default swaps." At the time of this writing, a single Bitcoin is being traded for $91.67 USD (although The Economist, at least, expects the bubble will pop soon).

Unfortunately, Ford also repeats the unsubstantiated claim that Bitcoin's meteoric price rise was sparked by fears over the Cyprus banking crisis. Data from Mt. Gox, which handles 76 percent of the Bitcoin currency trading in the world and essentially sets the market price, does not bear this out. The exact combination of factors is impossible to say, but it's more likely that an artificial scarcity automatically triggered in December sparked the price increase, which started back in January.