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Bitcoins a precious metal alternative

Bitcoins are becoming popular with investors who see the currency as a complement to precious metal investments.

Friday, January 10th 2014, 6:00AM

by Susan Edmunds

The currency was first traded in 2009 and is completely independent from any country or major bank, so it is entirely deregulated.

It is traded peer-to-peer and is a fast and cheap way of transferring money.

The currency's value has soared in recent months.

Its price is regulated by a process called "mining" that stops inflation getting out of control. It awards a set number of Bitcoins to random users - but from there the price is set by demand.

A number of companies accepted payment by Bitcoin but it is also rumoured to be finding favour in blackmarket transactions.

The Bank of America last month said it could become a major means for e-commerce and could be a serious competitior for money transfer providers.

Daniel Newton, of New Zealand’s bitcoin exchange, bitNZ said that, at the moment, only a small percentage of New Zealanders were trading the currency.

But the 1000% increase in price seen over the last six months has benefited those who have invested.

“I have definitely talked to people who invest in precious metals, such as gold and silver. Some of them have got into [Bitcoins],” he said.

Newton would not speculate on whether the currency would continue its soaring trajectory.

Yesterday, it was trading for $1030, up from less than $500 in the last quarter of last year.

But it isn't immune from volatilty - there was a dip in price in the middle of December, when the currency dropped from more than $1250 to about $800.

“It was partially a correction after the huge price rise and also because of bad news about regulatory bodies shutting down exchanges in China,” Newton said. “I have no idea where it will go from here.”

 

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