Gold falls, and skepticism over Bitcoin on the rise
Updated On: Apr 17 2013 09:03:16 PM CDT
The plummeting price of gold and silver has some turning to a new form of currency called the Bitcoin, and local investors are bracing themselves for what may soon be a rise in the high-tech micro-currency.
Although the price of precious metals took only a modest dip before the markets closed for the weekend, local pawn shop owners are seeing a magnified ripple effect with the deep-rooted and vast gold and silver market in southeast Idaho.
“As you can see, I'm completely out of what they call 'junk silver',” bookkeeper Khanti Simmons of Shamrock Rare Coins said. “We can't even purchase anything from our bigger company in a different state because they don't even have any to sell us.”
In fact, the local market for those precious metals is so prominent, the rush of investors had this popular pawn shop completely sold out of precious metals in less than one week.
However, now a new economic bubble is forming. But this time, instead of it inflating to the shape of gold or silver, it's looking like the Bitcoin.
The micro-currency is similar to real money, except it can only be traded through a virtual, online “banking” system.
If you are still not understanding, you are probably not alone.
To put it differently – the Bitcoin is almost the same as using Monopoly money to buy goods and services.
The currency is not backed by a central bank, and investors conjure-up their own sophisticated formulas and equations to privately legitimize the money in order to successfully trade among themselves.
With the wide-spread, global world market woes increasing, some investors who are growing skeptical of the U.S. Federal Reserve's fiscal policies are turning to this new, technological form of currency.
However, some local economists are saying virtual exchanges with no concrete backing could potentially pose a risk to investors who are not careful.
“One has to ask, 'what is the basis of the value in this and what will keep this thing valuable?'” Pocatello-based economist, Dan Cravens said. “Just because something is valuable right now does not necessarily mean it will be valuable in two weeks from now.”
Both Cravens and Simmons use the example of trading baseball cards: what was once a largely-valued, hot market that had the potential to rake-in millions of dollars over cards depicting the classic Honas Wagner or Joe DiMaggio, for example, is now a dying market.
“Why should I trade money which has a known value to it for a virtual money?” Cravens pointed-out.
Cravens also mentioned there has been a recent rise in the amount of micro-currencies popping-up in some small towns around the country. He said many of these small towns believe creating their own currencies and trading among themselves will help boost their local economies. However, he said this does not always work.
But with the Bitcoin feverishly plummeting in value this past Thursday and Friday by more than 70 percent, this has sent many investors back to the drawing board, wondering about the stability of the currency's future.
As for Simmons, he said all he can do right now is to just wait for the price of silver and gold to start climbing back upward.
“All we can do is just keep the faith,” Simmons said.
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