The Euro-zone sovereign debt crisis has ravaged European equity markets, ultimately forcing the European Central Bank to pledge the unlimited expansion of its balance sheet to prevent bond market turmoil. This has sent the Euro on wild swings against its major counterparts, the British Pound, the Japanese Yen, and the US Dollar.

The most recent chapter of the Euro-zone crisis, the “Ill-Constructed Bailout of Cyprus” (as I like to call it), has seen new measures taken in order to ensure bailout funds: capital controls. To prevent a full-on bank run resulting from the uninsured depositor tax levied on the country’s banks, the Cypriot government has implemented sweeping capital controls that effects transactions on an individual and international level:a €300/day cash withdrawal limit; a €1,000 limit on the amount travelers can take outside of the country; the use of checks worth up to €9,000/month; and a ceiling on transactions which do not require official central bank approval at €25,000.

With the Cypriot capital controls in place – a measure could very well be the beginning of a massive capital flight from the region, which would raise into question the viability of the Euro over the long-run – there has been a noted desire for an alternative investment vehicle to move money around the developed world. Usually, this role is filled by the precious metals, especially Gold and Silver; however, a new player has entered the ring – Bitcoin.

What is Bitcoin? It is a decentralized, electronic currency (known as a “digital currency” or a “crypto-currency”) created in January 2009. Unlike fiat currencies such as the Euro or the US Dollar, Bitcoins are not backed by a governing central bank and accompanying sovereign; there is no ‘Bitcoin Central Bank,’ so to speak. This raises an interesting concern about the money supply – if there is no central bank, who prints the money? That job goes to “bitcoin miners,” or individuals who use computers to decrypt strings of code in order to “unlock” Bitcoins, which are stored in “virtual wallets.” (While the actual process is more complex than what I’ve described, this basic outline is enough to understand Bitcoins on a conceptual level.)

BTC/USD – Bitcoins in US Dollars – April 10, 2013
Chart created by Christopher Vecchio, Currency Analyst usingBitcoincharts.com

Bitcoins have been on a bit of a ride recently, swinging from the low-$30s in early-March to near $150 on Wednesday, April 3. When Bitcoin first started in January 2009, it was trading under one penny (
Source: Daily fx