27 June 2014 / Barron’s – In the past four years, no asset class has done as well as Bitcoin – and it’s not even close. Since the beginning of 2010 to the end of 2013, it literally had a return of one million times capital invested, growing from 1,000 Bitcoins to the dollar to 1,000 dollars for a single Bitcoin.

Naturally, this trajectory has been anything but a straight line, with a sharp boom-bust cycle in 2011 (skyrocketing from $1 to $30 very quickly, followed by a slow, steady decline back to $1) and two smaller roller coaster rides in the past 18 months (from $13 to $266 then back to $50 in early 2013, then the most recent run-up from $100 to $1100 in less than 90 days this past winter, followed by a series of sharp drops down to its latest cyclical nadir at $380 a little over a month ago).

Today, the price has stabilized (for now) and has been trading in a more relatively narrow range of $550 to $620 for the past few weeks. Most of the price crashes had nothing to do with the adoption or usefulness of bitcoin, but of regulatory uncertainty and/or technological problems with a private company in Japan, Mt. Gox, which for many years was its largest exchange.

Just as the bankruptcy of Lehman Brothers and bailouts of AIG and Citibank sent shockwaves through the U.S. economy but did not collapse the dollar, so too did Mt. Gox’s incompetence in dealing with growth, technical and legal issues eventually lead to that company’s demise, but not bitcoin’s. Today, dozens of better run Bitcoin exchanges, most with professional management and millions in venture backing, are highly unlikely to repeat the same mistakes.

Bitcoin represents a fundamental change not only in the financial world, but in technology. The underlying algorithms that allow Bitcoins to be created but not duplicated, as well as to have a permanent, undisputable record of each transaction, is called the blockchain. This technological breakthrough has been hailed by many of our nation’s top venture capitalists as more important than the currency itself….. Read more

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