Data Mining Reveals the Factors Driving the Price of Bitcoins | Today's Trendings |
Two years ago a single bitcoin was worth around $5. Today it is worth around $600. Now one economist has worked out exactly what forces are behind this dramatic increase.


Bitcoin is an open-source, digital currency that has caught the public imagination for reasons good and bad in the last couple of years. Bitcoins are created as a reward for the computationally intensive work of verifying and recording payments in a public ledger.


This work is called mining and the more computing power that is put in, the more bitcoins that are created in return. This process will continue until 21 million bitcoins have been produced at a rate that will take the process well into the next century.


Although entirely digital, bitcoins are designed to function like a conventional currency. They can be used to purchase goods and can also be exchanged for conventional currencies such as U.S. dollars or Chinese renminbi.


But one curious feature of this market is that the price of bitcoins has soared from about $5 each in 2011 to about $600 each today. At one point late last year, a single bitcoin was worth more than $1000. Buying and holding bitcoins could therefore have realized a profit of more than 9,000 percent in less than a year.


It’s easy to imagine that this kind of price rise is simply the result of pure speculation. But perhaps there are other more traditional economic forces at work, such as demand and supply and so on.

Via Ashish Umre