Banks And Governments Paying Attention As Bitcoin Hits Record Highs
ROBERT SIEGEL, HOST:
The digital currency bitcoin has now done something that would make the biggest jumps in the stock market look like mere blips. The price of a single unit was worth $5,000 just two months ago. Today it would cost you nearly $10,000. It's a trend that is turning heads around the world. Banks, governments and everyday people are beginning to wonder how this relatively new technology could change the way that money works.
Nathaniel Popper is the author of "Digital Gold: Bitcoin And The Inside Story Of The Misfits And Millionaires Trying To Reinvent Money." Welcome to the program.
NATHANIEL POPPER: Thank you so much for having me.
SIEGEL: And first briefly tell us. What is bitcoin?
POPPER: Well, bitcoin - I think the thing that most people think of is it's this digital token that lives online that you can buy and sell. But bitcoin is also this computer network that bitcoin lives on. And it's the computer network that I think makes this so unusual. It's a computer network that allows you to hold bitcoin outside the control of any company or government.
SIEGEL: Since the beginning of the year, bitcoin's price has risen more than 900 percent. Why?
POPPER: (Laughter) Well, I think there is a degree to which this is just a speculative frenzy. But I think there is a little bit more going on than that. And that is I think this budding view that this is a really new financial technology. You know, bitcoin itself - I think there's a view that it is a new kind of digital gold. It's a scarce thing that you can own and hold online and, by the way, that's outside the control of any company or government. And so there are a certain number of people who are betting that this is the gold for the future.
SIEGEL: As you said, there are people who say this is just an investment frenzy. A bubble, is what they would say. Let's say it is a bubble. Let's say it bursts. Who would be harmed by that - just the people who hold the bitcoins? Are there funds that are investing in bitcoins? Who gets hit?
POPPER: Bitcoin has reached the point where all the bitcoins out there in the world - if, you know, you sold them at the price right now, they would be worth something like $160, $170 billion. So a lot of people think they have a lot of money on paper. And that's - those people are spread around the world in South Korea and China and Japan. Over the last year, hedge funds have gone into this in a big way and have been buying them up. It's not at the point where I think this would have an effect on the broader economy. But you know, it would cause a lot of pain for those people.
SIEGEL: Dollar deposits at the bank are insured up to a set limit by the FDIC - anything comparable to one's bitcoin account?
POPPER: No, there - your - when your bitcoin are gone, they're gone. There's no getting them back. And the companies that do this - some of them try to offer insurance, but most of them haven't been able to get an insurer to work with them. And that - you know, that's obviously part of the reason that it's so risky but also that it can move so much - is, you know, there's a sense that this is really new technology. And so to make this kind of money, you've got to take risks. I think the price moves are in some degree in proportion to the risks involved here.
SIEGEL: Nathaniel Popper is the author of "Digital Gold: Bitcoin And The Inside Story Of The Misfits And Millionaires Trying To Reinvent Money." He also covers finance and technology for The New York Times. Thanks for talking with us today.
POPPER: Thank you.
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