CALGARY - The Calgary founder of Canada’s first bitcoin exchange says he’s unconcerned by the sudden drop Wednesday in the digital currency’s value.

Joseph David, founder of VirtEx — which connects bitcoin buyers and sellers to each other in a secure virtual setting — said the price of the currency was already rebounding Thursday, 24 hours after the San Francisco arrest of the man allegedly behind the online black market Silk Road.

The site, which allowed users to anonymously trade in drugs and other illegal products, required its users to trade solely in bitcoins. When Silk Road was shut down Wednesday, the bitcoin quickly lost about a quarter of its value, with the price of one bitcoin falling from $126 to $100.

“There was a knee-jerk reaction when the news story hit,” said David, who started VirtEx in 2011. “The prices did fall, but they’ve rebounded (Thursday) to $115 per bitcoin. Which means that the bitcoin is strong, and that people use bitcoin for much more than the illegal purposes that Silk Road was trying to promote.”

Those who trade in bitcoins are no strangers to volatility. After trading as low as $17 in January, the price of a bitcoin surged to a high of $240 in April.

There are still only a small handful of bricks-and-mortar establishments that will allow payment in bitcoins (according to a CTV report, earlier this year, an Edmonton coffee house became the first Alberta business to do so), but the currency is popular in online trading because it is simple to use.

Bitcoin users can exchange them on a peer-to-peer basis, avoiding the fees associated with credit cards, debit cards, and wire transfers. Many users also look at bitcoins as an investment, holding onto them with the assumption their value will increase.

However, there are challenges. None of Canada’s five major banks will do business with VirtEx, David says, meaning he has had to go to smaller, second-tier banks with his company’s Canadian funds.

Finn Poschman, vice-president of research for the C.D. Howe Institute, said the fact that bitcoin offers anonymity to its users makes it vulnerable to use in illicit activities, and that doesn’t help it establish legitimacy among the “real” financial sector.

“Of course, cash and prepaid credit cards bear the same risks, but they are not seeking to establish their transactional legitimacy,” Poschman wrote in a Financial Post op-ed last month.

Still, Poschman said the rapid growth in bitcoin popularity shouldn’t be brushed off.

“Digital currencies are small compared to the traditional financial system, yet their appeal in an increasingly digital world signals a growth opportunity,” he said.

David — who said VirtEx has done $28 million in bitcoin trading since the company’s formation — said it’s clear some people still associate the digital currency with illegal activity.

However, he’s confident once more people understand it, bitcoin use will become mainstream. VirtEx recently hired five salespeople to convince Canadian merchants to include a bitcoin payment option on their online shopping sites, right alongside Visa, MasterCard, and PayPal. So far, they’ve been successful in signing up two companies, and David said more agreements are in the works.

For his part, David said he will do what it takes to raise awareness about what he believes is the currency of the future.

“Bitcoin is not a fad, it’s not some small little niche market,” he said. “And so the shutdown of one website (Silk Road) is not going to impact it that much.”

astephenson@calgaryherald.com