There are true believers in bitcoin, but others warn the bubble could burst
NEW YORK -- It is the hottest currency in the world: the bitcoin. In the past 12 months, investors have driven the value up nearly 1,500 percent. There are true believers, and others who warn the bitcoin bubble could burst.
At a New York City bar, the drinks are flowing -- and so is the conversation about bitcoin. "I think bitcoin is the future of currency," one patron said.
"What it promised was a money that could exist outside of the control of Wall Street and outside the control of any government," said New York Times reporter Nathaniel Popper.
So what is bitcoin? It isn't money you can hold in your hand. Some consider it the new gold -- a digital currency that exists online. You can buy and sell them on a bitcoin exchange. There's no central authority and they can be sent and received without third parties like a bank taking a cut. All transactions are tracked and verified on an electronic spreadsheet.
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The key to its success, like any currency, is trust in its backing. The Japanese government officially recognizes bitcoin while the U.S. government views it as property like stocks or any asset.
A growing number of major companies including Microsoft and Overstock.com and some smaller businesses are embracing it as well.
But red flags are being raised. Legendary investor Warren Buffet warns it will go bust, and Jamie Dimon, CEO of JPMorgan Chase, warns the lack of regulations means investors are playing with fire.
"If you're stupid enough to buy it, you'll play the price for it one day," Diamond said at the Institute of International Finance in October.
But 19-year-old Erik Finman has faith.
"You are the youngest bitcoin millionaire. How does that feel?" CBS News asked Finman. "It feels pretty great, not too bad for 19," he said.
At age 12, Finman invested a $1,000 gift from his grandma.
"I check the bitcoin price every 30 minutes," he said. "I get a notification on my phone, every 30 minutes I check the bitcoin price."
Despite its recent popularity, we are not yet at the point where bitcoin is widely used in day-to-day transactions. And as enticing as it may be, investing in bitcoin is not for everyone. A good rule of thumb: if you can't stomach a volatile market, it's best to take it really slow.