David Morgan Blog | Bitcoin Is Just A Bit-Player | Talkmarkets
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David Morgan is a widely recognized analyst in the precious metals industry and consults for hedge funds, high net worth investors, mining companies, depositories and bullion dealers. 

He is the publisher of the Silver ... more

Bitcoin Is Just A Bit-Player

Date: Saturday, August 27, 2016 9:05 AM EDT

Over the last few years, so-called “crypto-currencies” – digital equivalents of a monetary exchange unit – have been all the rage. The most well-known in the category, Bitcoin, has had quite a run. Starting out as a “virtual penny stock,” it rose in 2014 to the elevated height of $1,150, before crashing back to earth. This “electronic currency” is created and stored in a “wallet”. Purchases and sales are made via a “blockchain” which keeps a memory of every transaction conducted. Private keys (supposedly) provide assurance that a Bitcoin holder’s account is safe.

To avoid confusion, the following rules generally apply for correct usage of the term. Bitcoin, with a capital “B” refers to the peer-to-peer network that allows for marketplace exchanges without the need of a third party. A singular coin is referred to as a “bitcoin”. The plural form would be “bitcoins”. Having said this, it’s been our experience that about half the time, one sees see the term for the units capitalized. And the plural form seems most often to be spelled “bitcoin”.


In less than three years, two seminal events have served to give bitcoin users financial heartburn. They give Inquiring Minds (readers of this column?) a serious reason to put on their thinking caps, before starting to look on crypto-currencies as viable challengers to what history teaches us is real money – gold and silver.

In February, 2014, the Tokyo-based bitcoin exchange, Mt. Gox, which at the time handled 70% of all bitcoin transactions, suspended trading and filed for bankruptcy after 850,000 bitcoins went missing.

Then in early August 2016, 119,000 bitcoin worth $70 million were stolen from a Hong Kong exchange – one of the world’s largest. These two events alone should fully justify safety concerns. More important than the theft itself, was what the exchange decided to do about it. They decreed that account users who bore no responsibility for the loss, would still be subject to a 35% “bail-in” (exchange-approved theft) to make up for it.

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