Putting aside for a moment the latest evidence that the too-big-to-fail banks are increasingly confident that they can separate the technology behind bitcoin from the currency itself, this will be an interesting week for those whose enthusiasm for bitcoin includes a belief in the potential and practicality of the actual currency. This week, the financial media is consumed with speculation as to what the Fed will announce on Thursday, and what the effect of any such announcement will be on the stock market. Bitcoin enthusiasts will no doubt be looking on with a kind of bemused frustration as they watch Yellen, et al wrestle with a problem of their own making.

It was always known that at some point the ultra-low interest rate policy that the central bank has been pursuing since the recession would have to come to an end, but continuing until this point has made an exit much harder to execute. Markets have become accustomed to all of that free cash and could throw a hissy fit for a while if it is taken away. What will puzzle the bitcoin community, however, is why people allow the Fed’s deliberately inflationary policies, and their attempts to extricate themselves from them before it is too late, to affect to such a degree the value of their money and investments.

We should be careful, however, not to have too smug an attitude when it comes to this kind of thing. Like it or not, what the Fed decides to do this week will also have a bearing on the value of the bitcoin that you hold, at least in the short term.

The main reason for that is the most basic one of all: pricing. If U.S.-based holders of the virtual currency wish to spend the bitcoin that we hold, then the purchasing power of each unit is inextricably connected to the relative strength of the dollar, and interest rates are the main fundamental mover of currency strength. Put simply, if rates go up on Thursday then the dollar will become more attractive and its relative strength will increase. That means, by simple logic, that anything that is principally priced in dollar terms, other currencies, commodities etc., will be relatively weaker; their price in dollar terms will fall.

If, on the other hand, the Fed stands pat and leaves the zero interest rate policy intact, it is reasonable to expect some dollar weakness as a result. In fact, if this is the case, then the beneficial effect on the price of bitcoin could well be exaggerated. At some point, even with increases in demand for U.S. currency and a growing economy, loose monetary policy is bound to create some inflationary policy. Indeed, that is the stated aim of the Fed, to produce some “moderate” inflation.

The problem, as those of us old enough to remember the 70s and early 80s all too well can attest, is that inflation is harder to control than to induce. I am not painting a picture of runaway hyperinflation and people with wheelbarrows full of dollars, but the prospect of your cash devalued by even, say, 3.5 percent each year is unappealing to many. It would come as no surprise if at least some of those people educated themselves as to the disinflationary nature and inherently limited supply of bitcoin and decided to hold some as a hedge against the possibility of inflation in the future. Again, let’s not get carried away here. There will be no sudden surge in bitcoin ownership this week no matter what the Fed does, but reinforcing the value of bitcoin as inflation protection cannot be a bad thing for those that already hold the currency.

Despite the possibility of an increase in the relative value, however, I am sure that some bitcoin enthusiasts will be frustrated that even the price of their holdings will be influenced this week by the Fed’s actions. Many turned to virtual currency in an attempt to get away from the Fed and Wall Street controlling their wealth, but until there is a realistic market in goods priced in bitcoin, that influence cannot be avoided. For mow, therefore, even those attempting to hide from Fed influence would do well to pay attention to Thursday’s announcement.

b6589fc6ab0dc82cf12099d1c2d40ab994e8410c This slideshow takes a look at Bitcoin and its short history, as well as a few other virtual currencies that have left their marks in the world. .

Bitcoin was <a href='http://www.newyorker.com/magazine/2011/10/10/the-crypto- currency' target='_blank'>invented in 2008 by Satoshi Nakamoto</a>. It was released as open-source software in 2009. Nakamoto, who claimed to be a 36-year old Japanese man, said he created bitcoin in response to the financial crisis at the time. .

Bitcoin is a virtual currency (technically a cryptocurrency), and there are 21 million bitcoins which can be mined. As of August 2015, about 14,500,000 bitcoins have been mined. .

A cryptocurrency is <a href='http://www.coindesk.com/bitcoin-digital- currency-virtual-one/' target='_blank'>based on the principles of cryptography</a> - namely, based on a peer-to-peer network. Most currency in the world can be held digitally (like gift cards); currency that's virtual, like bitcoin, exist only on the internet. Some financial analysts consider bitcoin a commodity. .

At first, a single bitcoin was worth less than a penny; as of August 2015, a single bitcoin is worth about 215 U.S. dollars. .

He announced in April 2011 that he was moving on from bitcoin, leaving that life behind. A highly controversial 2014 Newsweek article claimed to have identified Nakamoto, but the bitcoin creator came out of hibernation to <a href='http://www.cnbc.com/2014/03/07/real-bitcoin-creator-i-am-not-dorian-nak…; target='_blank'>say that he was not the person identified</a> in the Newsweek article. Newsweek Magazine cover.

The blockchain is the heart of bitcoin. It's a public ledger that records all bitcoin transactions, open to all users. And it's incredibly secure, making tampering very difficult. The blockchain has drawn the interest of many financial companies. Even <a href='http://www.bloomberg.com/news/articles/2015-07-23/nasdaq-expects-to- be-first-exchange-to-use-bitcoin-technology' target='_blank'>Nasdaq is planning to incorporate blockchain technology</a>. .

Bitcoin has faced its share of controversies. Due to anonymity, people can use bitcoin to fund illicit activities (see: <a href='http://www.bloomberg.com/news/articles/2013-10-03/fbi-snags-silk-road-b…- own-methods' target='_blank'>Silk Road</a>). Another major dustup occured during the <a href='https://www.nasdaq.com/article/a-480-million-mystery-the-saga-of-mt-gox…; target='_blank'>$480 million collapse of Mt. Gox</a>. .

However, bitcoin is becoming widely accepted, with retailers like Microsoft and Baidu accepting bitcoins. It is by far the most well-known digital currency, but not the only one. .

It was launched in 1996, and was the <a href='http://www.wired.com/2009/06/e-gold/' target='_blank'>first digitial currency to get widepsread usage</a>. It let people open accounts based on the value of gold, but was ultimately shut down by the U.S. Federal government after its founder pleaded guilty to money laundering- related crimes, and running an unlicensed money transmitting service. .

In 2007, <a href='http://www.bankingtech.com/196932/virtual-currency-ven-takes-on-bitcoin…; target='_blank'>Ven was launched</a>. It is now seen as an alternative to bitcoin, based on currencies, commodities, and carbon futures, making it an environmentally conscious currency. It is listed on the London FX trading venue LMAX Exchange. .

This digital currency, along with DopeCoin hopes to make it <a href='http://smallbusiness.foxbusiness.com/technology-web/2014/03/20/dopecoin…- problems/' target='_blank'>easier for marijuana businesses to process money</a>. PotCoin focuses on the legalized marijuana industry. .

As mentioned earlier, bitcoin's blockchain technology has drawn a lot of interest, even to the point where some are saying that the <a href='http://www.forbes.com/sites/gregoryferenstein/2015/07/29/former-obama- tech-advisor-explains-how-bitcoin-could-transform-government-in-5-quotes/' target='_blank'>blockchain is actually more important than bitcoin itself</a>. .

Regulation of bitcoin, however, remains a contentious issue. Bitcoin adherents don't believe in regulation - after all, that was why bitcoin was made in the first place, they argue. But others see that bitcoin's growth and ultimate mainstream adoption requires some regulation. <a href='http://fortune.com/2015/04/23/theres-big-pressure-on-new-yorks-bitcoin-…; target='_blank'>New York was the first state to roll out a policy</a>, but more could be coming soon. . /

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.