Bitcoin Closes January 2012 Up 16.3%

January 2012 Wrapup

The Bitcoin exchange rate continues its upward march with a January closing price of $5.49 USD, a number 16.3% higher than the 2011 closing price.

Even with this gain the month-end price was still well below the month’s high when the exchange rate topped $7 several times earlier in the month.  Much of the reason for that level being reached was likely speculation attributed to the currency being the topic of an episode in the television legal drama The Good Wife which aired in the U.S. on January 15th, 2012.

At the fundamental level, the month showed impressive growth in the number of transactions processed daily — though investors are cautioned that these bitcoin metrics are easily manipulated and to consider this factor before using these metrics when making investment decisions.

Additional progress is being made with the ecosystem surrounding Bitcoin.  The financial intermediaries BitInstant and Paxum both added significant functionality that will help expand Bitcoin’s reach further, around the globe.

Just under a quarter-million bitcoins were issued (or “generated”, or “mined”) during the month worth nearly $1.5 million using the average daily valuation of $6.10.  Mining is back to being moderately profitable for the miners paying typical electric rates using typical mining hardware though as happens normally, there is only a short lag after the price moves before mining difficulty will catch up such that profitability nears breakeven.

While there aren’t any single upcoming developments that are expected to have a major impact over the next weeks, Bitcoin is showing resilience with growth in its utility as a currency and also as a store of value.  In 2011 it was January which was the month that things were relatively quiet and then February was the month when the pace quickened.

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