Welcome to bitcoin-mania, autumn edition. The fledgling crytocurrency’s value has climbed to an all-time high, and the conversation about whether this is the future of money or a hacker fad waiting to blow up in everyone's face is growing louder.
It’s not like we haven’t been here before: The epic bitcoin boom in April culminated in an equally epic market crash. So the question now is whether bitcoin's rising stock is the start of another bubble heading for an inevitable burst, or a sign that the volatile young currency is finally stabilizing. The answer to that question depends a lot on the answer to this one: Is all the hype around bitcoin making prices boom, or is the buzz a response to the skyrocketing market value?
We decided to look at some charts for clues. Using Google and Wikipedia as arbiters of public interest, the data over the last 30 days suggests that bitcoin’s popularity shot way up in the last few days of October—coinciding, coincidentally or not, with a New York Times article proclaiming the virtual currency had gone mainstream.
Google Trends shows that searches for the term "bitcoin" stayed pretty steady throughout the month until October 28, when it more than trippled almost overnight.
And a chart of Wikipedia pageviews mirrors that trend—slow and steady until the very end of last month, when the number of people visiting the site's bitcoin entry leaped from 18,000 to 113,274—an appreciable 700 percent increase.
And the market? Up and up, by all measures, though not without characteristic bumps in the road along the way. According to numbers from the largest bitcoin exchange, Mt. Gox, the currency started out October priced around $130, and has now doubled to nearly $240.
So what gives? Somewhat interestingly, the charts show that although bitcoin’s value has been climbing relatively steadily, its hyper-trendiness just kicked in this past week. That might be a clue that people's interest in the crytocurrency was piqued after a good long run on the market. Or it might not.
Here's what the experts are speculating is behind the latest bitcoin boom:
- Bitcoin is super hot in China right now. China's social media giant Baidu started accepting the virtual coins in mid-October and a Chinese exchange is fueling demand for the digital coins.
- Heavyweights in Silicon Valley have spoken out about why it’s a good idea to invest in the currency. (I mean, if the Winklevi twins are into it, it's probably the next Facebook, right?)
- The federal government shutdown happened. That got people wondering if the value of the US dollar was about to plummet, sparking interest in the decentralized currency, which isn’t subject to asinine political theater.
The fourth reason is the most interesting, if you ask me: the Silk Road bust at the beginning of October. When the FBI raided the online black market and seized 144,000 bitcoins (a $28.5 million value), it was a make or break moment for the fledgling currency, whose ascent to the mainstream had until then been held back by its reputation for financing the deep web's seedy criminal deals. Bitcoin weathered the storm like a champion. The price plummeted immediately following the bust, but quickly bounced back and has been rising ever since.
Some argue that severing ties with the notorious black market helped clean up bitcoin's image in the public eye, assuring would-be investors that it's a safe—and legal—bet. Or, the press frenzy around the Silk Road raid served as a kind of free publicity for bitcoin, generating buzz that in turn boosted the price.
In the end, the only way to know is to wait and see. And the bandwagon investors racing to buy up the digital coins will surely be keeping a close watch on what bitcoin does next. The future of the crytocurrency could depend on whether the hype machine and the marketplace keep on fueling each other all the way to a boom, or a bust.