Bitcoin: A Goldmine for Criminals

Bitcoin has been hitting the headlines quite a bit lately, and not in a very good way. The digital currency, once considered to potentially be worth its weight in gold, has been revealing more and more of its shady foundations.

Bitcoin is a peer-to-peer payment system of what is essentially a made up digital currency. It does, however, tout a pretty impressive US dollar value, fluctuating between $445-450 per Bitcoin. In its prime, a single Bitcoin held value of more than $800. There is one popular story of a man who invested $27 in Bitcoins and forgot all about it until four years later when he learned that his small investment was worth almost $1 million.

Since its beginnings, Bitcoin quickly found popularity among online black markets, where users could browse anonymously for illegal drugs or on illegal gambling sites. The reason here is anonymity: Bitcoin users are identified by their wallet number, and potentially their IP address, and that’s about it. This is unlike PayPal or online banking, where the owner is identified by their account number, Social Security number, and other information that could be damaging in the event the illegal transaction is busted by authorities.

While Bitcoin has been attempting to clean up their image, and have been mildly successful in expanding into non-illicit arenas, so far 2014 has been a bad year for the digital currency. In February, Mt.Gox, one of the most popular Bitcoin trading websites, was taken down, leaving millions of user’s Bitcoins unaccounted for. Shortly after, the website’s CEO Mark Karpeles resigned from the Bitcoin foundation and filed for bankruptcy. In late April, Charlie Shrem, the former vice chairman and CEO of leading Bitcoin sites, was indicted on and plead not guilty to money laundering and conspiracy charges over connections to the illegal online black-markets.

While these two incidents are not dispositive of whether or not Bitcoin is a legitimate enterprise, the value of the currency has been slipping ever since. Moreover, it may not help that the FBI holds over $100 million in Bitcoins seized from online black-markets.

And with a steady reporting of thefts from various sites, ranging from $50,000 to $650,000, one has to wonder what the future of this digital currency will look like. At this stage of the game, it seems reasonable to assume that Bitcoins shouldn’t be utilized as a long term investment strategy, unless you’re a drug dealer.