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More than one observer has compared investing in Bitcoin now to getting in on the California Gold Rush of 1849.
And there are numerous fascinating parallels. The lucky few who were mining Bitcoin back in 2010, when it could be done with just about any PC, generated hundreds of bitcoins that went from fractions of a penny to over $1,000 late last year.
Bitcoin miners now must spend tens of thousands of dollars on special mining hardware, and then must hope that Bitcoin prices will remain stable enough that they won't end up losing money.
Back in California, a similar thing happened. After most of the surface gold was grabbed up by the early arrivals, miners had to spend more and more money on specialized equipment in an attempt to reach the harder-to-get gold.
And of course, the investing term "pick-and-shovel play" comes from one entrepreneur of the California gold rush, Samuel Brannan, who cornered the market on mining gear at the start of the rush and quickly became a millionaire without mining a single flake himself.
In the Bitcoin world, several companies, particularly BitFury, are having success selling increasingly powerful Bitcoin mining hardware. The Bitcoin protocol is designed to increase the mathematical difficulty of the equations that the miners must solve to maintain a steady rate of Bitcoin creation (about one block every 10 minutes, worth 25 bitcoins right now).
But while the California gold rush for individuals had petered out by the mid-1850s, the disruptive technology of Bitcoin – which will touch millions of people all over the world – has only just started to have an impact.
As the Bitcoin economy has grown, more opportunities for investing in Bitcoin have arisen. Venture capitalists are pouring money not just into Bitcoin miners, but into payment processors, Bitcoin wallet companies, and Bitcoin exchanges.
These entrepreneurs will be Bitcoin's next millionaires and billionaires.
For a more complete comparison of the California Gold Rush to Bitcoin check out the infographic below:
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.