by François R. Velde – Senior economist, Federal Reserve Bank of Chicago
In this Chicago Fed Letter, I explain the digital currency called bitcoin. The current number of bitcoin units is around 11.8 million; and, unlike physical coins, they are divisible to the eighth decimal place. Bitcoins are traded on various online exchanges for other currencies. At the time of this writing, the average worth of a bitcoin over the previous six months had been a little over $100.
Thus, the total balances held in the form of bitcoins stood at around $1 billion, compared with $1,200 billion circulating in U.S. currency. There are on average about 30 bitcoin transactions per minute (Visa transactions average 200,000 per minute). The average bitcoin transaction size is about 16, i.e., on the order of $2,000 (the average Visa transaction is about $80). Bitcoin is thus a relatively small phenomenon, but it has been growing; the value of a bitcoin has increased tenfold since early 2013.
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