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Bitcoin prices climbed back over $1,000 yesterday (Monday), less than two weeks after the virtual currency crashed below $500.
The jump in Bitcoin prices was sparked by news that social game operator Zynga Inc. (Nasdaq: ZNGA) will now be accepting the virtual currency.
In a match made in Internet Heaven, those playing Farmville 2, CastleVille, ChefVille, CoasterVille, Hidden Chronicles, Hidden Shadows, and CityVille will be able to exchange Bitcoin for in-game purchases.
Zynga announced that it will be using the Bitcoin exchange BitPay to handle its transactions. Through BitPay, Zynga will be able to immediately take payments received in Bitcoin and convert them to a more traditional currency. That conversion eliminates fluctuation risk for merchants.
Bitcoin’s volatility, which has become a hallmark of the virtual currency, has been on full display in the last several months. At the end of November, it reached its highest price to date of more than $1,216 on the Mt. Gox exchange.
It didn’t stay there long. The currency crashed below $500 following a Dec. 18 announcement from BTC China (the world’s largest Bitcoin exchange by volume at the time) that it would no longer be accepting Chinese yuan deposits. That decision came several weeks after the Chinese government banned financial institutions from trading in Bitcoin.
That wasn’t the only negative story for Bitcoin in the last month, however.
Just this week, Taiwan’s Financial Supervisory Commission (FSC) announced that it will not allow Bitcoin ATMs in the country. The FSC rejects Bitcoin as a currency and doesn’t believe it should be accepted as payment by any bank or individual.
But even that negative news couldn’t keep the price of Bitcoin from surging. Since dropping below the $500 mark in December, the virtual currency’s value has risen quickly. By Dec. 26, the cryptocurrency was back over $800, and it has continued upward since.
Bitcoin was priced at $975.94 at the time of this writing.
What Does This Surge Mean for Bitcoin Prices?
Trying to predict that value of Bitcoin currently seems like an exercise in futility. The wild price swings it took throughout 2013 have clearly continued into 2014 with no signs of stopping.
That’s what makes investing in Bitcoin an exciting ride…
The virtual currency is highly reactive to both positive and negative news. While the price of Bitcoin can plummet after negative comments from the Chinese government, it can surge when an online game maker decides to accept it.
In the end, the news from Zynga isn’t exactly Earth-shattering. Zynga’s numbers are down as of late. Last quarter, the gaming company announced that daily active users were down to 30 million. That’s down from 60 million the year before.
Additionally, many of Zynga’s games are played through social media, like Facebook Inc. (Nasdaq: FB). That means a high number of Zynga users are using their smartphones and tablets to play games. At this time, Apple Inc. (Nasdaq: AAPL) does not support Bitcoin transactions. That excludes Zynga’s entire iPhone/iPad customer base from today’s news.
Bitcoin owners and traders should remain optimistic that the virtual currency was able to rebound so quickly from December’s bad news out of China. Especially if today’s Zynga headline can move the needle so much.
In the near future, expect Bitcoin prices to continue reacting directly to the headlines. Volatility will remain the name of the game – which means huge gains for some Bitcoin investors.
Get ready to hear about Bitcoin Gordon Gekko… a hedge fund in San Francisco is hiring a Bitcoin trader, and that’s big news for the Bitcoin market.
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