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Just a few kind words from a handful of federal officials about the positive aspects of the Bitcoin market Monday afternoon were all it took to send the digital currency rocketing from $675 to $900 in a matter of hours.
While Bitcoin prices settled back down into the $600s by Tuesday morning, the significance of the Bitcoin market's reaction should not be dismissed.
What was said at Monday's Congressional hearing before the Senate Homeland Security and Government Affairs Committee marked a turning point in how the U.S. government views Bitcoin.
Rather than being thought of as a rogue form of currency fit only for drug dealers, fraudsters, and other evildoers, speaker after speaker noted that Bitcoin can have a legitimate role to play.
"The Department of Justice recognizes that many virtual currency systems offer legitimate financial services and have the potential to promote more efficient global commerce," testified Mythili Raman, acting assistant attorney general for the DOJ's criminal division.
"Innovation is a very important part of our economy," Jennifer Calvery, director of the Treasury Department's Financial Crimes Enforcement Network (FinCEN), said of the Bitcoin market. "It's something for us to be proud of."
But perhaps the most remarkable statement came from U.S. Federal Reserve Chairman Ben Bernanke, who wrote a letter to the committee rather than appear in person.
Bernanke wrote that Bitcoin "may hold long-term promise, particularly if the innovations promote a faster, more secure, and more efficient payment system."
Bitcoin prices on the Japan-based exchange Mt. Gox immediately started to rise. By early Monday evening Bitcoin prices were more than $800, peaking briefly at $900 before beginning to slip back.
Why the Bitcoin Market Went so High
About the Author
Dave has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.