Will the Bitcoin Survive?

Bitcoin tokens are seen in Sandy, Utah, on April 3, 2013. The website of the major Bitcoin exchange Mt. Gox went offline Feb. 25, 2014, amid reports it suffered a debilitating theft, a new setback for efforts to gain legitimacy for the virtual currency. (Photo: Rick Bowmer, AP)
Bitcoin tokens are seen in Sandy, Utah, on April 3, 2013. The website of the major Bitcoin exchange Mt. Gox went offline Feb. 25, 2014, amid reports it suffered a debilitating theft, a new setback for efforts to gain legitimacy for the virtual currency.
(Photo: Rick Bowmer, AP)

The future of Bitcoin is being hotly debated in the wake of a huge online exchange site, but most say the cryptocurrency will move ahead.

Cryptocurrency experts around the globe are waging a furious back-and-forth battle to predict the future of Bitcoin — but the consensus is that the renegade currency will survive its first big setback just fine, even as a report comes that prosecutors are looking into a suddenly shuttered online exchange.

The collapse on Monday of Tokyo-based Mt. Gox, an online exchange site for Bitcoin, triggered seismic waves of anguish and anger across the Twitterverse and other online sites. An estimated 744,000 Bitcoins have been lost by Mt.Gox, valued at nearly $400 million.

Meanwhile, the Wall Street Journal, citing an unnamed person familiar with the matter, reported Tuesday that federal prosecutors in New York issued a subpoena to Mt. Gox.

The world is watching to see how the online currency rebounds. And while some warn of an end for Bitcoin, most experts say the Mt. Gox collapse will be a blip on the electronic currency’s radar screen.

“The Internet didn’t die when the dot.com bubble popped,” said Nate Pacer of Venture Scanner, a San Francisco firm that connects Bitcoin entrepreneurs with investors. “The Bitcoin protocol will definitely survive.”

Peter Leeds, financial publisher, countered: “It’s the beginning of its decline. … It won’t disappear, but it will be much less relevant.”

Launched in 2009, Bitcoin is a decentralized digital currency that is traded mostly online and person to person rather than through banks. Started by programmers whose identities remain anonymous, the unregulated cybercurrency has been gaining popularity in the USA and slowly entering the mainstream.

Trading firm SecondMarket has announced plans for a U.S.-based Bitcoin fund that allows investors to invest in Bitcoin without having to buy the cryptocurrency directly. On Tuesday, SecondMarket announced it would start a regulated, U.S.-based exchange. A second fund — from Cameron and Tyler Winklevoss of Facebook fame — has been filed with the Securities and Exchange Commission, further legitimizing the currency.

The Winklevoss twins used the incident to call for U.S. regulation of Bitcoin exchanges. “We are strong believers in the future of Bitcoin as an asset class and we are optimistic about the wider opportunities for Bitcoin,” they said in a statement.

Mt. Gox’s spectacular crash this week underscores the risk involved in trading in an unregulated, unbacked currency, said Darren Hayes, assistant professor at Pace University’s Seidenberg School of Computer Science and Information Systems in New York. Japanese authorities have said they will not get involved in the incident. Even if an agency investigates, there’s no paper trail and traders are mostly anonymous, making it nearly impossible to recover the money, he said.

“This has been a tremendous blow to the confidence of those who believe in the currency,” Hayes said.

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SOURCE: USA Today
Rick Jervis and Jon Swartz

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