A Big Year for Bitcoin

The first Bitcoin ATM in the US opened in Austin, Texas. And the virtual currency gained outspoken support from Overstock.com CEO Patrick Byrne, who launched reward features for Bitcoin spenders.

Though it seems to be a bullish year for Bitcoin so far, Big Think’s chief economist Daniel Altman, a bestselling author and an adjunct faculty member at New York University’s Stern School of Business, explains some recent red flags.

“This is the currency which only has value because people want to use it,” he explains. “It’s a currency that has been controversial, because one of its exchanges broke down recently with the possible loss of millions of dollars for people who thought they had Bitcoins that may have been stolen.”

Altman points to recent legal issues over how certain entities are allowed to trade Bitcoins. Will the currency be tracked? Can it remain truly private? The controversy has created volatility, but overall demand has grown as more and more people discover the Bitcoin craze.

All this makes owning Bitcoin a risky bet. The trend could run its course and there may be robust competitors that enter the market. Remember MySpace? We may have yet to see the Facebook of virtual currency.

“If you’re considering buying Bitcoins, I think the right way to think about it is something like investing in fine wines or expensive musical instruments or paintings,” says Altman. “It’s something that you wouldn’t want to do unless you really knew a lot about what was going on in that market and the underlying value of these things and how it was created.”

For more on Altman’s insights into the Bitcoin market, watch this clip from Big Think’s interview: