Unless you've been living under a rock, you have heard of bitcoin.

Prices of bitcoin soared further into record territory Tuesday, briefly trading above $4,700, as demand for the cryptocurrency, perceived by investors as a safer assets than fiat currencies, jumped following North Korea’s missile test over Japan.

One bitcoin BTCUSD, +4.72% was up 4.3% to $4,628, bringing its market capitalization to $76.4 billion. Since the start of the month, bitcoin has gained more than 60% and it is up about 360% so far this year, according to Coindesk.com.

Prices of Ether, the blockchain currency trading on Ethereum platform, also rose sharply, up nearly 5% at $364.85. Its total value is at about $34.4 billion. Despite recent rally, Ether is still below its all-time high $383.58, reached in June. Year to date, Ether is up more than 4,000% thus far in 2017.

That's an unbelievable run. Heavy emphasis on the word "unbelievable".

On paper, speculators in cryptocurrencies are getting amazingly wealthy, which is why you see articles like this:

This bitcoin millionaire teen says he turned $1K into $1M — so he’s skipping college

Does that remind you of anything?

Bitcoin is particularly vulnerable to scams. Those weakness are features, not bugs.



Problematic Bitcoin design features include: The risk of losing a password – a lost or forgotten password cannot be recovered so all bitcoins from an electronic wallet could be rendered unrecoverable. Insecure passwords can lead to bitcoins being stolen – for example through phishing scams. The irreversible nature of transactions means that stolen bitcoins diverted to another wallet, due to hacking or dishonest trading partners, cannot be reversed and recovered.

With these built-in flaws, it's not a surprise that bitcoins are a target of thieves.



The schadenfreude of Bitcoin enthusiasts over Ethereum’s recent troubles ended abruptly last week. A major Bitcoin exchange, Bitfinex, was hacked and nearly 120,000 BTC (around $60m) was stolen. The price of Bitcoin promptly crashed, and Bitfinex was forced to suspend trading. Suddenly, Ethereum was not the only basket case cryptocurrency around.

...Somehow, the hacker managed to gain access to hundreds of customer wallets. Not only did the hacker gain access to the wallets, he/she also overrode Bitgo’s withdrawal limits. It was a well-planned and comprehensive security breach by someone who knew exactly what they were doing. Funds were moved to thousands of addresses over a short period of time. Bitfinex, it seems, was powerless to stop it.

This is one of the largest Bitcoin heists ever, dwarfed only by Mt. Gox in 2014. It is comparable in size to Ethereum’s DAO theft only a couple of weeks ago. And it is going to result in a lot of people losing a lot of money. All of Bitfinex’s customers, in fact. The company has announced a haircut of 36.067% across the board

Regular banks also get stolen from. But in the case of banks, customers get their money back. Even more importantly, the bank doesn't make other customers pay for the theft.

That sort of thing alone should be enough to scare you off of bitcoin. But it gets worse.

Thieves also exploit investors.



Here’s another reason to be leery of the initial coin offerings being done at a staggering pace in the cryptocurrency world: there’s a one-in-10 chance you’ll end up a victim of theft.

Phishing scams have helped push up criminal losses to about $225 million this year, according to Chainalysis, a New York-based firm that analyzes transactions and provides anti-money laundering software. In such scams, investors are tricked into sending money to internet addresses pretending to be funding sites for digital token offerings related to the ethereum blockchain technology.

More than 30,000 people have fallen prey to ethereum-related cyber crime, losing an average of $7,500 each, with ICOs amassing about $1.6 billion in proceeds this year, Chainalysis estimates.

OK. You don't mind the risk? You are smarter than the thieves?

People are getting rich and you want a piece of it.

Fine, that's your choice.

But you have to ask yourself one important question: Where will you spend your riches?



Merchant acceptance of bitcoin, the leading cryptocurrency, is at an all-time low, according to a new report from JPMorgan covered by Bloomberg and Business Insider.

Out of the leading 500 internet sellers, just three accept bitcoin, down from five last year. That decline is what the report calls a “striking discrepancy,” in light of bitcoin’s price surging to a peak over $3,000 earlier this year.

The peak is limiting the benefit for both customers and merchants in accepting bitcoin. The currency saw a 55% increase in transaction volume this year, but it's probable that volume comes from trading rather than payments.

Bitcoin is a currency that is really hard to spend at $4,700.

What do you think is going to happen when bitcoin price starts to crash and people want to unload their bitcoins?

Do you think the few merchants that accept bitcoins are going to want to hold a currency falling uncontrollably in value?

When bitcoin prices start returning to Earth, those few exit doors will be closed and locked.