For those of you who have been curious about BitCoin, I thought I'd summarize my experience with this brave new digital currency and how I have been trading USD for BTC over the last year.
Since I started this thread, there was a very large BitCoin bubble where the value of a single BTC went to over $30 per BTC. Around this time there were several well publicized hacking events which took the wind out of the price and it plummeted to less than $4. Mt. Gox, the major online exchange, was hacked and almost went out of business and the future of the currency appeared doomed. For the last half of 2011, I sat on the sidelines watching the price and monitoring the chatter surrounding its future. I expected to see it disappear, but slowly the price began to pick up and it became clear to me that the underlying design of the currency is sound and that the publicized losses were due to poor online security precautions by users, rather than a flaw in the architecture of the currency.
January 2012, after seeing the prices slowly creeping up again, I jumped in and started exchanging dollars for bitcoin, via Mt Gox, for around $6 per coin. It's a little complicated getting dollars into a Mt. Gox account, but my solution has been to use Dwolla (an online payment service that will do business with Mt. Gox, unlike PayPal) as the intermediate step between my bank and Mt. Gox.
Really the only hiccup I've had has been related to the increasing security at Mt. Gox. About half way through the year they gave away free Yubikeys for each account holder, which sounded great, especially since I was already using one for managing my online password security scheme and had not had any problems with the technology. However, my Mt. Gox Yubikey is very tempermental when used and frequently would not be recognized, and thus threatened access to my Mt. Gox account, as well as a Blockchain account that I'd set up to use the same Yubikey. After this, I gave up on the Mt. Gox Yubikey and am using Google Authenticator on my iPhone as a secondary password, instead.
Soon after this, Mt. Gox encouraged me to update my account to "Trusted" status by verifying my identity, which would allow me to transfer larger amounts of currency. Although the amounts I'm trading didn't even get close to these limits, I decided I'd submit jpgs of my passport and a utility bill. The next day they sent me an email and said that my account would not be updated to "Trusted" unless I submitted notarized physical copies of the documents I'd sent them online. I figured, no big deal, I don't need the extra limits provided to "Trusted" members, so didn't do anything about it.
The problem was, a month or two later, when I tried to transfer some Bitcoin to a Blockchain wallet (which is highly encouraged, like a lot of things in life, you don't want all your coins in one place) but found that Mt. Gox was blocking any transfers out of my account. Of course, they still let me put money into the account and do trades, but would not allow me to remove either dollars or bitcoin until I completed the verification process and obtained "Trusted" status. Needless to say, I was a bit peeved, but no amount of online whining to Mt. Gox did any good, so I shelled out $70 for notarized copies and postage to Japan (Mt. Gox's physical address). This did it, they've awarded me "Trusted" status, although it took almost a month from the time the notarized documents were mailed.
Last week, there was a brief spike up to $19 per bitcoin, then quickly retreated to $16, and now it is playing with $18. I have no idea how this will all play out in the long run, but I will continue to build my holdings. There is a maximum number of coins that will be minted and each coin is divisible to 8 decimal places, so who knows where the value of a BitCoin will be in 10 years, it could be defunct, or it could be worth $100,000. I certainly am not putting all my eggs in this basket, just as I'm not putting it all into metals, either, but I think it's an interesting concept that holds a lot of promise.
