GOLDEN VALLEY, Minn. - Odds are you've heard of Bitcoin by now, and at roughly $4,500 dollars per coin, there are a lot of people saying, "Why didn't I invest in that two years ago?"
Let's start this story with a story.
The Winklevoss twins—the brothers who sued claiming Facebook was their idea and settled for millions—invested $11 million in Bitcoin four years ago when one bitcoin was worth $120.
Last week, the price of one bitcoin was worth about $4,900, meaning the Winklevoss brothers just turned $11 million into $450 million.
However, that fairy tale isn’t experienced by a lot of people.
The price of a bitcoin just dropped roughly 20 percent in two days as some investors cashed in on their profits, and the market reacted to another announcement from China banning new cryptocurrency openings.
Before we get to the stability of Bitcoin, first an explainer.
Bitcoin is a digital currency or cryptocurrency.
You can buy it and spend it just like cash all over the world with the click of a button.
So what's the story behind it that makes people believe in it?
Bitcoin is a currency that does not use government or banks.
It is as if you reached your hand through a computer and handed a dollar to someone on another computer.
It has a maximum number of bitcoins that will ever be released (21,000,000) to curb inflation.
And all transactions are verified, publicly, for all to see. This is the foundation of its security, using a process called blockchain.
It's also anonymous. While anyone with an internet connection can see every transaction that’s ever occurred (like the world’s longest bookie ledger), no one knows who is making transactions.
This is a big part of Bitcoin’s nefarious history.
The co-founder of Blockchain Intelligence Group estimates that illegal transactions have fallen from about half to 20 percent of the total volume, according to a recent interview with CNBC.
He also says the latest volatility is another healthy correction in the currency’s value.
“Yes, Bitcoin is in a bubble,” said Antonopoulos. “It's actually in its 10th bubble so far. And what it manages to do as every bubble bursts, it gets a bit higher than the previous one.”
He says that cryptocurrencies are not for everyone, yet.
“I think this technology is still maturing, it's still gaining interest," said Antonopoulos. "We saw over the last two decades how the internet has done that in a number of industries: music, media, TV, entertainment, news, journalism. And in every one of those industries, when it's removed intermediaries, this has led to more choice and lower prices and better service for consumers."