Digital Dollars soar on-line

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They won't make a sound no matter how many of them you try to toss in a bucket, and you can't pitch them in a fountain and wish for good luck. But make no mistake, bitcoins are getting big.

The online alternative currency, previously little more than a curiosity in financial markets since its 2009 inception, has zoomed in trading value since the Cyprus banking crisis erupted two weeks ago.

With fears spreading that even insured deposits might not be safe in similar nations hit by banking crises, those looking for a haven to store their wealth have fled to the complicated world of digital cash.

"Incremental demand for bitcoin is coming from the geographic areas most affected by the Cypriot financial crisis-individuals in countries like Greece or Spain, worried that they will be next to feel the threat of deposit taxes," Nicholas Colas, chief market strategist at ConvergEx, said in a report on the startling trend.

Bitcoins operate on a network that, at least on the surface, resembles a typical exchange on the capital markets. Buyers can exchange their paper currencies for bitcoins and use them wherever they are accepted. Sellers can exchange their bitcoins back for their original currency.

But the value of the currency has been anything but typical.

Bitcoincharts.com lists the value of bitcoins compared to other currencies, including U.S. and Canadian dollars, euros and pounds.

On one of the U.S. currency exchanges, labeled "Mt. Gox," the bitcoin value has zoomed to more than $87 in Wednesday trade. That represents close to a 20 percent gain over just the past week, a one-month gain of 41 percent and nearly a quintupling of value in the past year.

The "Mt. Gox" euro trading has seen numbers nearly identical to the dollar pairing.

A more sober perspective might suggest that bitcoins are at best a momentary bubble and at worst a risky chance to take considering their novelty.

But the trend also exemplifies just how nervous cash-holders are over the European situation.

"This is a clear sign that people are looking for alternative ways to get their money out of the country," said Christopher Vecchio, currency analyst at DailyFX. "If we're going to talk about the stability of the euro and whether or not there are going to be capital controls in place not just in Cyprus but around the euro zone, I think there is some efficacy behind bitcoins as an alternative liquidity vehicle."

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