Bitcoin is coming down to Earth – for the time being at least.
The so-called digital currency recently traded at $ 31,594.03, down 9.6% on the day and down 25% from its $ 41,947 record, set on Jan. 7.
Besides gravity, a factor in bitcoin’s collapse on Thursday may be a trade blog suggesting the existence of double spending. That refers to the same bitcoin token being used by the same person in two different transactions.
To be sure, some industry pros say the double spending conversation is much more free.
“In this case, it doesn’t look like a trader has been fooled,” Nic Carter, co-founder of Coin Metrics, a data firm, told Bloomberg. “This doesn’t look sinister to me. My best guess is this is a software experiment or bug. ”
Anyway, bitcoin seems to be riding a jet stream of hot air. Advocates say it represents a store of value, but it is a store of value only because people believe it is one.
Proponents of Bitcoin argue that the dollar represents a store of value just because people see it that way. But the dollar has the full faith and support of the US government, while bitcoin has no underlying asset at all.
Bitcoin itself does not meet the basic definition of a currency: an asset used as a medium of exchange in legitimate trade.
In November, digital payment processors went through just $ 269.7 million of worldwide merchant sales in bitcoin, according to research compiled by Chainalysis for The Wall Street Journal.
US retail sales for that month were more than 2,000 times that figure: $ 546.5 billion.
Bitcoin has been very volatile since its introduction in 2009. Nauseable lows have followed alarming highs. Skeptics say: Caveat emptor.