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Bitcoin Bit by Hackers

Posted on 02/25/2014 by | AARP Blog Author | Comments

Bulletin Today | Money & Savings Print Print

So it seems Japan-based Mt. Gox, the largest exchange for bitcoins, the  virtual-currency released in 2009 by an anonymous creator, got ripped off by hackers. While we may not actually know the total amount taken,  it may be large enough to push the company into bankruptcy.

iStock_000033344850MediumThe bitcoin program, as the New York Times explains, “runs on the computers of anyone who joins in, and it is set to release only 21 million coins in regular increments. The coins can be moved between digital wallets using secret passwords.

“While Bitcoin fans have said the technology could provide a revolutionary new way of moving money around the world, skeptics have viewed it variously as a Ponzi scheme or an investment susceptible to fraud and theft,” according to the Times.

I’m not really surprised by this latest development.  For the average retail investor without a lot of money to burn, the take-away is this: stay away from trendy, next-best-thing investments.

Aside from the lack of transparency about how they’re created – or mined –  as bitcoiners call it,  the price of each bitcoin has been extremely volatile, ranging from $1,200 to $500 in a matter of months. That’s usually another red flag for long-term investors trying to save for retirement, the kids’ college bills or buying a house.

I agree with Bloomberg’s Barry Ritholtz who says of the small, but vocal group of crypto-anarchists who strongly disapprove of “worthless” paper currencies:  ”Please send me your worthless fiat currency, be it euros or dollars, for proper disposal.  I will assist in freeing you from this troublesome paper.”

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