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Will Better Technology Deflate Bitcoin Fever?

Ron DeLegge

Bitcoin has been called "electronic gold," "synthetic money" and a "crypto-currency." Big name investors, the public and startup companies have fueled bitcoin fever along with speculation about its future.

On Mt. Gox (no relation to Mt. Rushmore), the second largest digital currency exchange by volume, bitcoin prices topped $1,000. That's a ten-fold increase from April, when bitcoin prices broke $100. The S&P 500 (IVV - News) and Dow Jones Average (DIA - News) aren't the only benchmarks hitting all-time highs!

Blogger Phil Carney describes the mania this way:

"The bitcoin currency is decentralized therefore not controlled by any one person and so offers protection from the endless rounds of Central Bank money printing. This assists the promoters of bitcoin in peddling the fallacy that it offers a safe haven away from invasive government spying, and of course, those evil parasites they refer to as the 'banksters' (banker/gangsters)."

Bitcoin's Competition

If world governments can't dilute or deflate the value of bitcoin, is there anything else that can? The answer may surprise you.

Inventors of competing digital currencies are plentiful and are already seeking to dethrone bitcoin. And they may succeed.

The list of bitcoin competitors and alternatives grows by the week, here are just a few:








Moore's Law and Bitcoin

In 1965, Moore's law was introduced by Intel co-founder Gordon E. Moore to explain how in the technology world the number of transistors on integrated circuits doubles approximately every two years. Yet, despite the constant improvement in chip processing power, the cost of computer hardware has consistently decreased over time.

What's the point?

Although bitcoin's fan base calls it a "currency," referring to bitcoin as a technological solution is probably a more accurate description. And as technology improves, "the cost of a unit decreases exponentially over time," says Moore's law.

Think about it this way: If Moore's law has proven to be a reliable indicator in an established marketplace like semiconductors, what about the jungle-like world of techno-synthetic currencies?

Regardless, bitcoin is still being pitched as an alternative to the U.S. dollar (UUP - News) and even to long-established assets like gold (IAU - News) and silver (SLV - News).

In the end, Bitcoin's ultimate worth will be challenged by new and improved digital technologies that are faster, easier to use, and even more secure. Just wait.

The ETF Profit Strategy Newsletter uses technical, fundamental, and sentiment analysis along with market history and common sense to keep investors on the right side of the market. Since the beginning of the year, 74% of our weekly ETF picks have been winners. (through Q3 2013)

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