Bitcoin has dropped about 50 percent in value this year. But even at around $6,740, the cryptocurrency is really a bitcon.
Recently, Bloomberg News reported that the Justice Department has opened a criminal probe into the possibility that traders are manipulating the price of bitcoin and other digital currencies.
There are already investigations going on, as I reported, about bitcoin being used for criminal purposes.
Why is the probe about manipulating prices so important? Because bitcoin is a confidence game. Like anything else we value, bitcoin is only worth something because people are confident that it is worth something.
The problem with bitcoin is that it has nothing backing it up — you can’t turn it into jewelry like gold or put it on someone’s finger like a diamond. And it doesn’t have the backing of any country.
Confidence in bitcoin will erode when the price declines and nobody can legally prop it up through manipulation.