What Are Bitcoins, And Why Are They Suddenly Losing Value?

Photo (cc) by zcopley

If you haven’t heard of Bitcoins yet, you probably will soon. On Wednesday, their value dropped from a record-high $260 to $130 in just a few hours, according to The Guardian.

But that’s not bad if you bought them two months ago, when they were worth only $20.

Bitcoin is a digital currency that appeared in 2009, developed by an anonymous computer programmer as an open-source (free, nonproprietary) project. Now a lot of people are working to make the virtual money more secure through the Bitcoin Foundation. There have been hacking attempts on both the exchanges where bitcoins are traded, and on the virtual wallets where they are kept.

According to the Bitcoin website, more than 40,000 transactions were made per day in February, worth a total of more than $1 million. The total value of bitcoins in circulation at that point was above $300 million.

It’s harder to say what they’re really worth right now, because the past few days have been a wild ride. After falling to $130, their price went back up to $200, and back down to $160. After panicking users started selling off their Bitcoins, one of the largest exchanges, Mt. Gox, halted trading until Friday. The last price was $123.40.

Mt. Gox says it was “a victim of our own success” and unprepared for a sudden surge in interest. The site says it’s been getting 20,000 new users per day in the past couple weeks and that’s been slowing down its system performance, so it has to make upgrades.

The allure of the Bitcoin currency — aside from its (sometimes) skyrocketing value and novelty — is that it exists outside any central banking system. Transactions can be made instantly worldwide from a smartphone without additional fees or regulation.

But there are drawbacks. Aside from the price volatility and the risk of drawing hacker interest, there are no standard consumer protections. Transactions are irreversible, and it’s relatively difficult to stay anonymous or keep your balance a secret compared with traditional banking. Bitcoins also have a somewhat shady reputation because they’re used for illegal activities including drug deals and online gambling, according to The Guardian.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
5 Monthly Bills You Can Easily Negotiate Down
5 Monthly Bills You Can Easily Negotiate Down

Here’s how to bring down recurring expenses and save hundreds — or even thousands — of dollars each year.

5 Reasons You Should Claim Social Security ASAP
5 Reasons You Should Claim Social Security ASAP

Experts often recommend postponing claiming your Social Security retirement benefits. But there are situations in which you should start taking the money sooner.

Drivers Give These 5 Car Insurers the Highest Marks
Drivers Give These 5 Car Insurers the Highest Marks

One company claimed the top ranking in several categories.

The Best and Worst States for Raising a Family in 2021
The Best and Worst States for Raising a Family in 2021

These states have big advantages or disadvantages when it comes to choosing a home for your family.

7 Tips for Building an Emergency Food Supply
7 Tips for Building an Emergency Food Supply

A pandemic or natural disaster could leave you reliant on your existing emergency food supply. Is your pantry well-prepared for emergencies? Knowing what to stock up on for emergencies can be a difficult task and we’re here to help.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
7 Kirkland Signature Items to Avoid at Costco
7 Kirkland Signature Items to Avoid at Costco

Even if it seems you save a bundle buying Costco’s Kirkland Signature brand products, they may not be the bargain they appear to be.

How to Buy Gas At Costco Without a Membership
How to Buy Gas At Costco Without a Membership

The warehouse club often has some of the cheapest gas in town. Here’s how you can get it as a nonmember.

10 Things to Stop Buying If You Want a Clutter-Free Home
10 Things to Stop Buying If You Want a Clutter-Free Home

If you like to keep things simple, avoid these purchases.

A Simple Way to Silence Robocalls Today
A Simple Way to Silence Robocalls Today

A few steps can keep your phone from ringing when a spammer calls.

This Company Makes the Best Tires in America
This Company Makes the Best Tires in America

Driver satisfaction with tires is at an all-time high, but one brand stands out.

If You Find This Thrift Shopping, Buy It
If You Find This Thrift Shopping, Buy It

Vacuums from this brand can last a half-century, if not longer — and they’re hot on the resale market.

This Health Issue Can Hint at Dementia Years in Advance
This Health Issue Can Hint at Dementia Years in Advance

One type of pain is especially associated with cognitive decline.

Can I Switch to Spousal Social Security Benefits When My Ex Dies?
Can I Switch to Spousal Social Security Benefits When My Ex Dies?

Knowing when to claim can help you maximize benefits.

If You Find This Thrift Shopping, Buy It
If You Find This Thrift Shopping, Buy It

This iconic dinnerware is prized for everyday use as well as reselling for profit.

Medicare Will Not Cover These 6 Medical Costs
Medicare Will Not Cover These 6 Medical Costs

Don’t let these health care expenses catch you off guard in retirement.

8 Things You Should Always Buy on Amazon
8 Things You Should Always Buy on Amazon

The giant retailer shines when it comes to these things, from basics to hard-to-find specialty goods.

Beware This Hidden Ingredient in Rotisserie Chicken
Beware This Hidden Ingredient in Rotisserie Chicken

Something foul may lurk in those delicious, ready-to-eat birds.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

5 Ways to Fill Your Pantry With Free Food
5 Ways to Fill Your Pantry With Free Food

Anyone can take advantage of these resources.

5 States With the Worst Health Care for Retirees
5 States With the Worst Health Care for Retirees

All of these states are located in the same region of the nation.

6 Reasons You Should Stop Hiding Cash at Home
6 Reasons You Should Stop Hiding Cash at Home

Stashing money around the house is anything but harmless.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

7 Big Purchases You Should Never Make
7 Big Purchases You Should Never Make

Sometimes a big-ticket purchase is nothing more than a big waste of money.

5 Products You Should Never Buy Generic
5 Products You Should Never Buy Generic

Sometimes the brand-name version is clearly superior.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.